Many taxpayers struggle to pay and clear their tax dues. An Offer in Compromise is one of the best and quickest ways to clear IRS tax debts without getting into trouble. Taxpayers who owe the IRS can now benefit from the “Fresh Start” initiative that alters the Offer in Compromise program’s terms to accommodate more taxpayers.
An Offer in Compromise (OIC) is basically a contract between the IRS and the taxpayer to have the debt settled for a less value than the actual amount owed. The sum payable is usually agreed upon between the IRS and the taxpayer after sufficiently proving the inability of the taxpayer to clear all the debt in a single payment or an alternative payment agreement. To determine the suitability of the OIC applicants as well as an appropriate collection value, the assets and incomes of the taxpayer are closed reviewed and assessed by the IRS.
Different financial reviews used to determine the eligibility of the taxpayer for an OIC have been revised. Some of the revisions include;
- Initial calculation of a taxpayer’s anticipated income was done based on four years for offers paid in five months or less. The IRS revised this to just one year, and two years instead of the previous five for those offers whose payment is done within six and 24 months. The maximum payment period of all OICs is 24 months after the date of accepting the offer.
- Taxpayers can now repay their student loans with Federal government guaranteeing the loan’s minimum payments allowed for the post-high school learning of the taxpayer. Presentation of proof of payment is mandatory.
- Taxpayers who owe delinquent state, local or federal taxes but lack the capacity to pay for the liabilities fully are allowed to make monthly payments within their respective states to the state’s taxing bodies. However, this is limited to some circumstances.
- Citizens in a similar geographical area have an expanded and common Allowable Living Expense allowance calculation criteria. The uniform allowances include average costs for basic needs. The standards apply during the evaluation of the requests for installment agreement and offer-in-compromise. With the expansion of the National Standard allowances for miscellaneous, more taxpayers have their credit cards payments and bank fees and other charges covered.
You can get additional information about the “Fresh Start” initiative from the IRS website. Also, read the booklet on Offer in Compromise, Form 656-B as well as Form 656. You can also order additional information by calling 1-800-TAX-FORM (800-829-3676).