Weisberg Kainen Mark, P.L.
Experienced and zealous advocates
when you need us most
Call: 305-374-5544

Changes to offers in compromise aim to help with tax debts

Florida taxpayers with large tax debts may be interested to know that the Internal Revenue Service has eased some of the requirements for offers in compromise. The important changes come as part of the agency's "Fresh Start" program, which has instituted a series of measures over the past few years to help people with tax debts.

An offer in compromise is an effective tool for taxpayers to settle their debts with the IRS for less than the total amount owed. The IRS will typically not accept an OIC when it concludes that the taxpayer can pay the entire amount of tax owed. To determine how much it believes a person can afford to pay, the agency measures a person's "reasonable collection potential." The announced changes to OICs largely concern how the IRS makes this measurement.

The IRS first looks at a person's assets, income and tax debt. But the agency recognizes that people must devote a percentage of their income to daily necessities, so it has a category of "allowable living expenses" that factor in to a person's collection potential. The Fresh Start program has broadened the items that fall under allowable expenses to include bank fees and credit card bills. In addition, some past due state and local taxes and payments made on government-backed post-secondary education loans have also been added.

In the past, the IRS looked relatively far ahead at a person's future income to determine collection potential. But for OICs paid off within a certain time, the IRS has now shortened its horizons. Taxpayers who pay offers within five months will only have to submit future income figures for the next year. And taxpayers who complete payment between six and 24 months will have to submit income figures for the upcoming two years.

Successful acceptance of an OIC requires compliance with certain legal criteria, so it is important that taxpayers ensure that their offers meet those standards.

Source: Internal Revenue Service, "IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start," IR-2012-53, May 21, 2012.

Contact Information

L1401 Brickell Avenue, Suite 800
Miami, Florida 33131-3504
Phone: 305.374.5544
Fax: 305.358.8565