New IRS rules concerning offers in compromise

Chad Silver

Chad Silver

Managing Partner of Silver Tax Group, author of the book "Stop the IRS". Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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On behalf of Silver Tax Group posted in Back Taxes on Wednesday, March 22, 2017.

The IRS has recently tightened its rules concerning offers in compromise for dealing with tax debt. The new rules will go into effect on March 27, 2017. Under these changes, the IRS can now return any Offer in Compromise application after a taxpayer fails to file all required tax return information.

Through an offer in compromise, those with tax debt can settle with the IRS for less than what that individual owes. The IRS has used offers in compromise for individuals facing daunting tax liability or those who are facing financial hardship.

When deciding upon whether to accept or reject an Offer in Compromise application, the IRS will look at certain factors including:

  • A taxpayer’s ability to pay taxes owed
  • The income of the taxpayer
  • Current expenses the taxpayer faces
  • The assets and any equity the taxpayer owns

The criteria for acceptance of an offer in compromise “represents the most we [the IRS] can expect to collect within a reasonable period of time.” In its announcement, the IRS states it expects for you to explore all of your options prior to submitting an Offer in Compromise application. Eligibility hinges upon whether you are current with filings and payments. An open bankruptcy proceeding will also make you ineligible to apply.

It’s important to know all of the facts prior to filing an offer in comprise, and a consultation with an experienced tax attorney may be in order. It is also possible that other options could be available to you including other IRS programs or possibly entering into a settlement agreement with the IRS.

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