There a little bit, they can be a cash offer which means it’s payable within 5 months of acceptance of the offer or it can be structured as a\u00a024 month\u00a0equal monthly installment type thing<\/a>.\u00a0 But in this case, let me explain how the offer program used to work and then what the IRS Fresh Start Initiative did.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Ok.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0The way the IRS, the offer and compromise used to be calculated was they would take the taxpayers monthly disposable income and disposable income is the difference between their gross income so all the money comes in minus their allowable expenses.\u00a0 So the way it used to be calculated was the IRS would take their monthly disposable income multiply by 48 plus the value of their assets and that equaled the amount of their offer and compromise so let me give you an example…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So if they have $2000 they probably don’t have that much, $1000 in disposable income.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Well let me make the math even easier.\u00a0 Let\u2019s say they have a hundred dollars a month in disposable income.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Ok<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0100 times 48 and let\u2019s assume there’s no assets that would be that their offer was $4800 and it kind of doesn’t matter how much they owe at least in this example ok so the IRS Fresh Start Initiative came out in March of 2012 and the biggest distinction was they went ahead and changed that 48\u00a0multiplier\u00a0to 12 so that same person who had a hundred dollars in monthly disposable income would now, that would be multiplied by 12 instead of 48 and so that would mean that first\u00a0person’s offer was $4800 after the fresh start initiative that\u00a0offer\u00a0is only $1200.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Alright.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0So really big deal.\u00a0 Before 2012, we did a lot of offers. We would lose a lot of offers because just the amount of money was just so high and\u00a0having\u00a0somebody with a hundred dollars\u2019 monthly disposable income is not terribly common that’s just the example that I used.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Right.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0You have to understand that there is a pretty big distinction or pretty big exception to and that is, a lot of times we talk on the show how there is a 10-year statute of limitations for the collection of tax right so what that means is after the tax is assessed…so\u00a0let’s\u00a0if think of that after you start to owe…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Well this is 2016 so let’s use a bill from 2006.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Ok so you file a tax return for the tax year 2006, you file a 2007 right,\u00a0tax\u00a0is assessed you have a bill, you have a balance due and…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0I owe hundred thousand dollars in 2007 when I filed for 2006.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Ok so in that scenario\u00a0then\u00a0most likely that collections statute is going to expire in 2017 right so you file on April 15, 2007…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So it’s from the filing date sort of?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0There are some exceptions to that too but they are not that interesting for the sake of live radio but yeah that’s the goal.\u00a0 So there’s that 10-year statute of limitations ok so here is the big exception to the offer and compromise program and that is if the monthly disposable income would be sufficient to\u00a0full-pay\u00a0the tax liability over the life of the statute of limitations then you don’t get your deal.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Ok so break that down…<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Let me give you an example.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>Yeah cause that is so fast and lawyer IRS talk.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Totally understand.\u00a0 So let’s say that you have thousand dollars\u2019 monthly disposable income, 1000×12 is $12,000 right pretty good deal, let’s assume you owe hundred grand…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Ok.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0But there\u00a0is\u00a0120 months left on the collections statute of limitations.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Ok.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Ok well if you just paid that thousand dollars in monthly disposable income that you had over the life of the remaining number of months on the statute of limitations so 120×1000 now that would be 120,000 that’s more than you owe which is 100,000 makes sense?<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yeah I think so.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0So in that case you are not going to get the deal you are just going to get, they just want you to pay the thousand dollars a month and that’s something that newer practitioners in this area get tripped up on a lot, they just do the first math and they go ok great you are in great shape but they forget that if you can pay, if that’s enough to full pay over the life of the statute then the IRS isn’t going to give you the deal.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0They forget all about the second part that goes into that math equation.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Well I can tell you from experience you learn that rule one time and you are not likely to forget it.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yeah taking a boo boo\u00a0on\u00a0one case just once.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Well you know I may have learned that lesson a long time ago.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0I’m sure you fixed it but.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0So sometimes that leads us to situations where it’s actually easier, it’s almost always easier now because of that exception, to resolve bigger cases rather than smaller cases, I say that on\u00a0air\u00a0a lot.\u00a0 Right?<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yes.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0And the train wreck of the week this week is actually is going to be an illustration of that I’m really proud of it because the balance is relatively low but it just so happens…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0It’s the way it worked out.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah, just the way it worked out on this particular case.\u00a0 So the IRS Fresh Start Initiative was really kind of a big deal.\u00a0 It changed the multiplier from 48 to 12 and really what it did was it opened up the landscape to where many, many more people were eligible for offers and since then I can say in our case our success rate has gone way high because it is just much more lenient and more doable.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0I’m curious the IRS probably didn’t I don’t know if they publicized it but if they tracked what they result were like the difference between the number of outstanding tax debtors that did not pay and kind of skipped out when that multiplier was 48 compared to know that it’s 12 if that percentage of people that owe is actually lower.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0So is the question did they accept more offers or?<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So the question is; was it effective?\u00a0 The question is; was the IRS rule changing from 48 percent multiplier to 12 is it now, was it effective for them? Are they getting a lot more taxpayers back into the system, are they able to resolve a lot of these I didn’t pay my tax debt issues?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0At the break I will try to look up the stats because those stats are probably, my guess is that\u00a0there’s\u00a0a whole lot more offers and compromise which would meet the desired goal of getting more tax payers kind of out of the shadows and into the system, which we talked about on the show a lot that’s really what their goal is, it’s not so much about collecting a couple of thousand dollars to settle that hundred thousand dollar tax debt it’s more about getting that person to come in out of the cold and you know get back in the system so that this doesn’t go on for another 10 years.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Right.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0You know…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Cause the sooner they can get some tax revenue it’s better than zero.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah absolutely and\u00a0there’s\u00a0not Social Security taxes isn’t being paid there’s all kinds of tax not being paid and…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Which we talked a lot about the psyche behind if you owe a tax debt like how that kind of\u00a0weighs\u00a0on your brain so I mean it would imagine for any business earner, a lot of your people are small business or larger business owners, the sooner they can clear up this mess in there head the more money they are going to be able to make.\u00a0 Right?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Absolutely.\u00a0 We see it all the time like once the burden, the emotional burden is lifted then they are more successful in almost every area of their life.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yeah we did like a whole show on this once.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0I think we have done more than one whole show.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0It’s over at where your podcast’s stored.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0You can find it at\u00a0ITunes\u00a0under the IRS Problem Solver or you can also download our app which is presently called The IRS Problem Solver all those are being changed over to The IRS Solution Attorney.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Wow.\u00a0 You can find everything on getirshelp.com\/blog\/ that's probably the simpler\u2026<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah that’s easier.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0You are listening to the IRS Solution Attorney show we are live in studio 888-404-1010 if you have a question we are talking about The IRS Fresh Start Initiative we will be back in a moment.<\/p>\n <\/p>\n
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KATRINA MADEWELL:\u00a0<\/strong>\u00a0Well that’s the Steve Miller band great choice, Pat.\u00a0 You know what’s funny is my kids like totally know all the words to Steve Miller band songs all of them.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0I think that is probably Chris’s influence right?<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Maybe both of us, I think we both like Steve Miller.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0I like Steve Miller.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0He’s a little bit more of the 80’s rocker.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0A little Peter Frampton make your guitar sing.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yes I could see you saying that yes I can.\u00a0 So if you are just not tuning into the show we are talking about The IRS Fresh Start Initiative what it is, how it works, how it changed and Darrin was explaining that a couple of years ago their multiplier on how they calculate what you are going to repay changed.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Absolutely in March of 2012 the IRS basically made it 75% cheaper to settle with the IRS based upon their program called the Offer and Compromise so before it would be really hard to get offers through I mean we would file a lot of offers in part because back in those days, say the early 2000’s even we could file an offer and compromise and literally it would sit on the shelf someplace for 2 years, 3 years, 4 years, 5 years it would just sit and the benefit to that was, well there was 2 benefits for a brief period of time the collection statute of limitations was running while an offer was filed which was great…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0I was going to say that’s good for the taxpayer isn’t it?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah it was great for the taxpayer and also the IRS cannot levy or take any adverse collection action against a taxpayer while the offer is pending <\/a>so…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So they can’t pursue you for anything new.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0So we may have filed some offers that were maybe a little bit aggressive or questionable because we knew it was just going to throw a monkey wrench in the system it was just going to\u00a0like\u00a0disappear for years at a time.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0In my\u00a0business\u00a0we call that throwing stuff to the wall to see what sticks.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah well we have to be careful how I characterize that but one of the nice things that came about I think this was part of the fresh start initiative the IRS also put a 2-year time limit on offers and compromise so you might have had an offer take an average 3 plus years in the past well now the law is that they can only take 2 years\u2019 maximum.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0This is the IRS, 2 years to get to it.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0They only have 2 years to get to it and if they don’t get to it than your offer is deemed accepted as filed.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Wow.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Which is pretty cool.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So how many of those did you get in when they changed that?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Now I’m about to tell you that I have not had one that actually took the whole 2 years and I’ve never even heard of anyone that took the whole 2 years.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0So even before when it sat on the shelf for 5 years?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Well, back then that would happen it would just sit on the shelf for 5 years then obviously a tax payer\u2019s financial situation would change in 5 years right so….<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0But they have to look at it as presented at the time you filed?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Well how it works now is you file the offer and compromise and it sits again on the shelf for 6-18 months something like that and we have to update the financials usually 1 time to get a like more accurate snapshot of what’s happening.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Hey that’s less then you have to update it in the mortgage process when you are buying a house.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0For sure you know going through the mortgage process right now yeah an offer is way, way easier than getting a self-employed mortgage right now.\u00a0 But it’s similar in a lot of ways honestly, bank statements and you know all that stuff but…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0First born, DNA.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0We did have an offer that got pretty close, we had one that got about 22-23 months and it was about a 2.2-million-dollar liability.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Oh you were just waiting, you were just watching your email and your clock.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0I was dying, I was wanting them to blow that but they didn’t blow it they ended up rejecting the offer and it’s under appeal now.\u00a0 I do think it’s going to go through but the appeal time is not part of the 2 years.<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Gotcha.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0But they are a lot better at it.\u00a0 They’re, we did it….<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Did they hire more people or something like increase their employees?<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0I think they have hired more people and\u00a0they\u00a0kind of triage the cases in a way you\u00a0know,\u00a0like you know what triage is if there is a big accident you have to kind of prioritize patients in order of severity of the problem, well what the IRS does is…<\/p>\nKATRINA MADEWELL:\u00a0<\/strong>\u00a0Yeah like who’s leg has to be amputated first like.<\/p>\nDARRIN T. MISH:\u00a0<\/strong>\u00a0Yeah or this person needs treatment immediately or they are going to die, this person is just in a lot of pain and isn’t going to die you know so that, that second guy is like going to be in pain for a while but anyway.<\/p>\n
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