The IRS Announces Favorable Offer-in-Compromise Program Changes

June 1, 2012 – The Internal Revenue Service announced taxpayer favorable changes to its “Fresh Start” initiative.  More flexible options were made to the Offer-in-Compromise (OIC) program that should help “some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.” See IR-2012-53, May 21, 2012.

The IRS announcement focuses on the financial analysis used qualify taxpayers for the OIC program, and helps more taxpayers to clear up their tax issues in on or two years, as opposed to four or five, common under the old OIC program standards.

Changes to the OIC program announced by the IRS 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.”

The repayment periods seem to be the most significant change to the OIC program.  “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. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.”

To see how these and other changes to the Offer-in-Compromise program can assist if you are struggling with back taxes to the IRS, please contact the Law Office of Paul Grego.

See:  IR-2012-53, May 21, 2012, and http://www.irs.gov/newsroom/article/0,,id=257542,00.html