Agency Announces More Flexible Offer in Compromise Terms
Looking to give a little leeway to struggling taxpayers, the IRS recently announced that it was loosening the terms for those trying to strike a deal with their back tax debt.
IRS Offers in Compromise are agreements between the IRS and a taxpayer that settle a taxpayer’s back tax debt for less than the total amount owed. The IRS recently announced that it was loosening the eligibility requirements for OICs, decreasing the amount of future income that’s considered as part of its approval process.
The IRS typically won’t accept an OIC if it believes the taxpayer can pay the entire amount of back tax debt as a lump sum or through a payment process. Often considered are the taxpayer’s income and assets. The more income and assets, the less likely an OIC is accepted.
Factors typically included four years of future income for offers paid in five or fewer months, or five years of future income for offers paid between six months to two years. The IRS decreased those requirements to one year and two years of future income, respectively, giving taxpayers more wiggle room in making an OIC.
Offers in Compromise may sound like a cure for back tax debt, but the IRS’s new, loosened requirements don’t mean OICs will be given away like candy. The IRS has always viewed Offers in Compromise on strict terms, with specific requirements, and has rejected many more than it has accepted.
Offers in Compromise are one of the more popular advertised tax relief programs seen and heard on television and radio, but they still have strict requirements with a relatively low percentage of qualifying taxpayers. Applying for an OIC without meeting the requirements can lead to revamped IRS collection efforts.
Whether you have back tax debt or are looking to get in the IRS’s good graces, working with a tax professional or tax attorney is the best way to get your financial house in order. Qualifying for an Offer in Compromise can be tough, but can be pursued appropriately by working with those who have the right expertise.
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