IRS accepts 27% of all offers in compromise filed.
Last year that accounted for 14,000 plus offers being accepted by the IRS. An Offer in Compromise a IRS tax settlement.
Being a Former IRS Agent and teaching Instructor I have seen taxpayers struggle needlessly for years in an effort to settle their tax bills with the IRS. The old system was broke and the truth of the matter, the old Offer in Compromise Program was completely broke and was in need of much improvement.
It was almost impossible to get an Offer in Compromise through the IRS because the system was to hard, to complicated, unachievable the general attitude of the IRS by the Agents to the program was to simply reject offers in compromise.
Finally IRS stepped up to the plate and completely revamped the program and now the question remains, will IRS follow through and accept offers under the new Fresh Start Program. The changes made are huge. I firmly believe if the IRS follows up with its press releases and administers the program like it is fashioned out, the taxpayers can breathe again and be free of the bondage which they have be held captive too.
The New Fresh Start Program, the affordable tax settlement process:
The Internal Revenue Service announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly and affordable than in the past and this is welcome news.
The new Fresh Start Program focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as one to two years compared to four or five years in the past.
Changes to the program include:
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to repay their student loans.
- Allowing taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
What is a Offer in Compromise? – Doubt as to Collectibility
In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. 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. There are two other offer programs not mentioned in this blog. Call us for more details, 1-866-700-1040.
The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements. To get the Offer to acceptance process is both lengthy and a bit complicated.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations. IRS finally got the picture.
When the IRS calculates a taxpayer’s reasonable collection potential, it 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. All offers must be fully paid within 24 months of the date the offer is accepted.
Other changes to the OIC 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.
Changes to the Allowable Living Expenses Section
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
Changes to The National Standard Section
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges.
Changes to The Miscellaneous Section
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer’s post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
Offers in Compromise, New Tax Settlement Program ,Fresh Start Tax, Affordable Tax Solutions
