The IRS announced today that it is expanding its “Fresh Start” initiative to provide for more flexible terms to its Offer in Compromise (OIC) program. In general, an OIC is an agreement between a taxpayer and the IRS, settling the taxpayer’s tax liabilities for less than the full amount due (subject to compliance with the terms of the OIC). The IRS noted that it will alter its focus on the financial analysis used to determine which taxpayers qualify for an OIC, as well as enable certain taxpayers to resolve their tax problems in as few as two years, as compared to four or five years in previous years.
Other announced changes for certain taxpayers include: 1) Revising the calculation for the taxpayer’s future income, 2) Allowing taxpayers to repay their student loans, 3) Allowing taxpayers to pay state and local delinquent taxes, and 4) Expanding the Allowable Living Expense allowance category and amount.
OIC’s generally will not accepted if the IRS believes, after examining a taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential, that the liability can be paid in full as a lump sum or a through installment payments. Under the new “Fresh Start” changes, however, 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.)
Under the new program, all OIC’s must be fully paid within 24 months of the date of acceptance of the offer. (Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, have been revised to reflect the changes).
Business seeking to make a business OIC will also likely benefit from revisions to the program narrowing the parameters and clarifying when a dissipated asset will be included in the calculation of reasonable collection potential. Additionally, in general, calculation of reasonable collection potential will not include equity in income producing assets for on-going businesses.
Contact Sherayzen Law Office for Making a Business Offer in Compromise
Making an Offer in Compromise can be a potentially complex process for both individuals and businesses. If you find yourself or your business in this situation, contact Sherayzen Law Office for legal help.