TAX TIPS (and other stuff)

By Kelly J. Bullis, CPA

2025-April 12th

 

Title: Owe the IRS … Maybe You Need a “Fresh Start”

 Sometimes we are so underwater with debt that bankruptcy starts to be appealing.  The problem is some taxes are not discharged in bankruptcy.  Especially payroll taxes.  Other times, the only debt you have is the IRS and you don’t want to declare bankruptcy.

 Well, that is where the IRS Fresh Start program might be an option for you.  The IRS cleverly named it the “Fresh Start” program because it was designed to help taxpayers, who owe money to the IRS, to get back on they feet with a fresh start.

 If a person is approved for a “Fresh Start,” they may be able to reduce their tax debt by all the way up to 100%.

This program was started in 2011 and the IRS is obligated to offer this assistance to eligible taxpayers who have federal tax debts.  This is the source of all those radio commercials claiming to be able to get you relieved of your IRS tax debt.  Those scam artists are acting like they are the ones who have the ability to get that IRS debt resolved.  In reality, they are just tapping into the IRS Fresh Start program that any tax preparer can activate.  (We’ve done it many times for our clients who have qualified.)

There are 4 parts to the Fresh Start program.

Installment Agreements: This is where you agree to pay a specific amount to the IRS each month.  Those monthly payments reduce your overall tax debt, but you keep paying until the debt is paid off in full.

Offer-in-Compromise:  This is also affectionately known as “OIC.”  It allows you to settle a tax debt with the IRS for less than the full amount that is owed based on the reasonable collection potential of your unique situation.  We’ve invoked the OIC for several clients.  The key is to demonstrate you have no assets to pay the IRS with and your monthly cash flow is barely giving you enough to live on.  Too many folks try to do an OIC and then discover they don’t qualify because they have assets, such as equity in their home, retirement funds in an IRA, etc.

Non-Collectible Status: This is when you can’t afford an Installment Agreement, and you don’t qualify for an OIC.  If you’re granted this status, the IRS halts any collection activities, including wage garnishments, bank levies, tax liens, or continuing collection notices from the IRS.  It does not erase your tax debt, just suspends it.  (There is another IRS rule, not part of the Fresh Start, that requires the IRS to write off old tax debts that are older than 10 years, so there is a chance that eventually, the entire tax debt would be discharged.)

 Penalty Abatement: When asked nicely, the IRS usually will consider reducing or even dropping a penalty.  You have to give the IRS “reasonable cause” for dropping a penalty.

Have you heard?  Job 29:20 says, “My glory is fresh in me.  My bow is renewed in my hand.”

Kelly Bullis is a Certified Public Accountant in Carson City.  Contact him at 775-882-4459.  On the web at BullisAndCo.com  Also on Facebook.