The IRS has expanded on its "Fresh Start" initiative which is aimed at helping struggling taxpayers get back on their feet. The new Fresh Start Offer in Compromise program will enable a tax forgiveness for some of the most financially distressed taxpayers. This program provides a plan to clear up the taxpayers' back tax debt much more quickly than the program did in the past.
"This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years," said IRS Commissioner Doug Shulman. "It's part of our (the IRS) multiyear effort to help taxpayers who are struggling to make ends meet."
The announcement by the IRS focuses on the financial formula used to determine which taxpayers will be qualified and eligible for a tax forgiveness and an IRS settlement through the Offer in Compromise program. The expanded IRS Fresh Start program will also enable some taxpayers to resolve their tax problems and back tax debt in as little as 24 months compared to the four (4) or five (5) years in the past.
The financial formula for calculating a successful Offer in Compromise is complicated. The IRS Fresh Start program is now adding the following changes to settlement offer formula:
1. Revising the calculation for a taxpayers future income;
2. Allowing a struggling taxpayer to repay their student loan(s);
3. Allowing a taxpayer to pay their state and local delinquent taxes; and
4. The IRS has also expanded the Allowable Living Expense allowance category and amount.
WHAT IS AN OFFER IN COMPROMISE?
An Offer in Compromise is a settlement agreement between a taxpayer and the IRS that will settle the tax liabilities of a taxpayer for less than the full amount owed in back taxes. An Offer in Compromise (a/k/a OIC) is generally not accepted by the IRS if the IRS believes the back tax liability can be paid in full as a lump sum or through a payment agreement. The IRS has a complicated formula which includes looking at a taxpayer's income and assets to make a determination of the taxpayer's reasonable collection potential.
Because of the economic times that we are living through, the IRS has been forced to recognize that many taxpayers are continuing to struggle to pay their bills. Due to the sheer volume of delinquent taxpayers, the IRS has been working to put in place common sense changes to the Offer in Compromise program.
In the new Fresh Start program, the IRS, when looking at the taxpayer's reasonable collection potential, the IRS will now look at only one (1) year of future income for settlement offers that will be paid in five (5) or fewer months, down from four (4) years, and the IRS will look at two (2) years of future income for offers paid in six (6) to 24 months, down from five (5) years.
All settlement offers in the Fresh Start program must be fully paid within 24 months of the date that the taxpayer's Offer in Compromise settlement has been accepted.
The IRS Fresh Start program also includes changes to the parameters and clarification of when a dissipated asset will be included in the financial formula for 'reasonable collection potential." Also, equity in income producing assets, generally, will not be included in the calculation of reasonable collection potential for an on going business.
OFFER IN COMPROMISE FORMULA
The IRS takes into account many variables when considering acceptance of a Offer in Compromise. One of the factors involved is what is called Allowable Living Expenses. The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer's ability to pay their tax debt. The standard allowances provide the IRS a consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for taxpayers in similar geographic regions. These same allowable standards are used when the IRS evaluates either an Installment Agreement or an Offer in Compromise.
The IRS Fresh Start program now expands the miscellaneous expenses to include credit card payments as well as bank fees and charges. The IRS will also allow a taxpayer's payments for loans guaranteed by the federal government for the taxpayer's post high school education. A taxpayer's payment for delinquent state and local taxes may be allowed in an Offer in Compromise based on a percentage of the tax owed to the state and IRS.
WHO QUALIFIES FOR A FRESH START AND TAX FORGIVENESS?
Not everyone is qualified for tax forgiveness under the Fresh Start Offer in Compromise program. A taxpayer must be struggling financially. If you are struggling to get by, if your house has has little to no equity and you have few if any assets, then you would be foolish not to look at doing an Offer in Compromise settlement.
The vast majority of people are like yourself. Like you, most taxpayers who owe a back tax debt are honest people who now find themselves in financial trouble through no fault of their own. Taxpayers, like yourself, need help. You need a way to resolve your IRS problem. Having the IRS levy your paycheck or bank account is not the answer to your problem.
You don't have to go underground. You don't have to live in fear. You don't have to live with anxiety. You don't have to make a choice of feeding your family or paying the IRS.
The IRS has a tax forgiveness program available which is called the Fresh Start Offer in Compromise program. You can take advantage of this settlement program should you choose to resolve your IRS problem.
CAN YOU DO YOUR OWN OFFER IN COMPROMISE?
Yes you can. Like your tax returns, you can prepare your own Offer in Compromise. We don't recommend it because you have to understand the IRS. The IRS exists to collect money. Although you have rights and there are rules and regulations to benefit you, the IRS is not going to assist you. You are on your own. If the IRS can find any reason to disqualify an Offer in Compromise that has been submitted, the IRS will. The IRS will send your settlement offer back to you as "un-processable." If you fail to "dot an I" or "cross a T" on your offer submission, the IRS will send your Offer back to you without a reason for its rejection. You will never know why the IRS rejected your settlement.
Do you know the complete formula for an Offer in Compromise? Probably not. Why would you offer the IRS more than you should? On the other hand, if you try and "low ball" the IRS, they will simply reject your settlement offer and you will have to start the process all over again. If your Offer in Compromise is rejected, your tax debt will immediately go back to the enforcement division of the IRS.
SUBMIT YOUR OFFER IN COMPROMISE CORRECTLY THE FIRST TIME.
It will be cheaper, faster and more efficient if you have the IRS tax relief team at Flat Fee Tax Service, Inc. prepare you settlement offer for you. Our team, led by experienced IRS Tax Attorneys, has a proven track record of successful settlement offers. When you combine the level of expertise at Flat Fee Tax Service, Inc. with our very affordable fees, our clients receive value that is unsurpassed. We are Accredited by the Better Business Bureau and have a stellar record of achievement. You are in good hands when you become our client.