23 May IRS Offer-in-Compromise (OIC) Terms Now More Flexible
Posted at 00:00h in Offer In Compromise
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 Offer-in-Compromise (OIC) program to more closely reflect real-world situations. Generally an OIC is an agreement between a taxpayer and the IRS that settles tax liabilities for less than the full amount owed subject to acceptance on legal requirements.
An OIC is generally only accepted if the IRS believes the liability cannot be paid in full as a lump sum or through a payment agreement as determined by reviewing income and assets to arrive at what is referred to as your reasonable collection potential. As such the IRS announced interim guidance via a Memorandum for Offer in Compromise via IR-2012-53 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 than in the past.
The announcement 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 two years compared to four or five years in the past. In certain circumstances, the changes announced today 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.