Settling your IRS tax debt has just been made much easier through the new Fresh Start Program just launched by the Internal Revenue Service.
On May 21, 2012 the Internal Revenue Service announced another expansion of its “Fresh Start” initiative by offering much more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially troubled taxpayers/businesses to clear up their IRS tax problems/issues and in many cases more quickly than in the past. This is one of the biggest changes ever by the IRS in regard to IRS tax debt.
The new announcement specifically targets on the financial analysis used to determine which taxpayers qualify for an Offer in Compromise or a tax debt settlement.
This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years or in some cases 10 years in the past.
In certain circumstances, the changes announced today include:
1. Revising the calculation for the taxpayer’s future income
.2 Allowing taxpayers to repay their student loans.
3. Allowing taxpayers to pay state and local delinquent taxes.
4. Expanding the Allowable Living Expense allowance category and amount.
An OIC ( Offer in Compromise ) is an agreement between a taxpayer and the IRS that settles the taxpayer’s IRS tax debt liabilities for less than the full amount owed. In many cases “pennies on a dollar’. The usually settlement is about $.014.
An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s two major assets:
1. all income including social security, disability income,
2. liquid assets including 401k and all pensions
to make a determination of the taxpayer’s reasonable collection potential.
Offers in Compromise are subject to acceptance on legal requirements and must be approved by 3 layers of IRS management.
The IRS finally recognizes that many taxpayers are still struggling to pay their debts and are underwater on there mortgages so the IRS has been working to put in place “common-sense changes” to the OIC program. This change is long over due.
When the IRS calculates a taxpayer’s reasonable collection potential, the Internal Revenue Service will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. This is a huge change and will allow the taxpayers to reduce their IRS tax debt as far down as 75%.
Settling your IRS tax debt has really been made much easier starting today.
All offers in compromise must be fully paid within 24 months of the date the offer in compromise is accepted.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
It is always best to make sure your offer in compromise or your tax debt settlement qualifies for a tax settlement in the first place.
Call the tax professionals at Fresh Start Tax LLC. We are comprised of Board Certified Tax Attorneys, CPA’s and Former IRS Agents and Managers.
We can also file all past due, late, or back tax returns. We are your firm for immedaite and permanent tax relief on back taxes.