Accepted! The Offer in Compromise Program

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.

In certain circumstances, the expansion include:

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.

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.

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.

Allowable Living Expenses

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.

The modifications to the Fresh Start Program Represent a significant improvement to the IRS’ previous Offer in Compromise Program. If done correctly, you will be able to settle your tax debt for significantly less than you owe.

At Capstone, we work closely with our clients to draft a narrative that accurately shows each client’s unique financial situation. Using a sophisticated approach, we will present your case in the best possible light to the taxing authority.

How Capstone Can Help?

The chances of getting your tax debt forgiven improve exponentially when you have a team of experienced tax professionals on your side. Our extensive experience dealing with the IRS puts our firm in a unique position to be the greatest advocate for getting your Offer in Compromise accepted. By using IRS guidelines and procedures to our advantage, we are able to maximize our acceptance rate. Capstone’s team of Enrolled Agents have successfully negotiated countless OIC’s, and realized millions of dollars in client savings.

To find out if you qualify for an Offer in Compromise, or if other resolution strategies are available for your unique situation please contact our team.