The Internal Revenue Service recently announced another expansion of its
“Fresh Start Initiative” by offering more flexible terms to its Offer in
Compromise (OIC) program. These changes will enable financially distressed taxpayers to
clear up their tax problems more quickly than in the past based on the new qualifying critera.
The announcement focused 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 two years, compared to four or five
years in the past.
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to use student loan repayments as qualifying expenses.
- Allowing taxpayers to pay state and local delinquent taxes as qualifying expenses.
- Expanding the Allowable Living Expense category and increasing the amounts.
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 over a number of years. The IRS examines at the taxpayer’s
income and assets to make a determination of the taxpayer’s reasonable
collection potential. OICs are subject to acceptance by an examiner and legal review.
Using a strategic approach, Capstone Tax Consulting has been extremely
successful negotiating and receiving acceptance of OICs on behalf of our
clients and is seeing an increase in accepted settlements by employing these new criteria.