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New Offer-in-Compromise (OIC) terms to benefit taxpayers

On July 9, 2012 posted in IRS Information, IRS Representation Blog

New Offer-in-Compromise (OIC) terms to benefit taxpayers

The IRS expanded its “Fresh Start” program to offer more flexible terms to its OIC program to help taxpayers resolve tax problems more quickly.  An OIC is an agreement between the taxpayer and IRS that settles tax liabilities for less than the full amount owed.  The offer will not be accepted if the IRS believes the debt can be paid in full.  They will gladly accept either a lump sum payment or a payment agreement based on income and assets.

Revisions in OIC Calculations

  • The IRS will only use one instead of four years of future income for offers paid in five months or less.  For those taxpayers that need up to twenty four months, which is the maximum time limit to pay, taxpayers are only assessed for two years instead of five.
  • Taxpayers are now allowed to repay student loans at the minimum payment guaranteed by the federal government for post high school education.  Documentation must be provided to support these payments.
  • Delinquent taxes on the local or state level also?  The IRS may allow the taxpayer to pay these taxes as a monthly agreement if they do not have the ability to fully pay the liability under certain circumstances.
  • Expansion of the Allowable Living Expense Allowance Standard.  These standards are used when evaluating an installment agreement or OIC request.  Taxpayers can use the allowance to cover expenses such as credit card payments and bank fees based on similar geographic areas and averages.