October 26, 2012 /24-7PressRelease/
-- IRS Expands Offer in Compromise Plan
In 2011, the Internal Revenue Service began its "Fresh Start" initiative, a series of programs designed to help individuals and small business resolve unpaid tax debts and prevent tax liens. As part of Fresh Start, the IRS expanded its Offer in Compromise program in May 2012, with the intent of helping more people qualify. Those with tax debts should be aware of the OIC program and the changes the IRS made to it.
What Is an Offer in Compromise?
An offer in compromise is a proposal that a taxpayer makes to the IRS to settle outstanding tax debt for a reduced amount when repaying the entire debt would cause a financial hardship for the taxpayer. The IRS will typically only accept offers that are the most the agency could expect to collect from the taxpayer within a reasonable amount of time.
The IRS considers several factors when assessing offers in compromise from taxpayers, including:
-The taxpayer's ability to pay
-The taxpayer's income
-The taxpayer's expenses
-The equity the taxpayer has in assets
The taxpayer can either choose to make a lump-sum payment or set up an installment plan.
What Changes Did the IRS Make?
Since so many people are still struggling to pay their bills, the IRS has adjusted the way that it calculates a person's future income for the purposes of assessing collection potential to see whether a filer qualifies to make an offer in compromise. The IRS will now only consider one year of future income for offers that will be paid in five months, instead of four years as in the past. For payments that the taxpayer will complete in six to 24 months, the IRS will now only consider two years' worth of future income, rather than five years. The IRS also will not consider equity-producing assets in income calculations for small businesses, and it has narrowed the definition of assets included in calculations of collection potential.
In addition to these changes, the IRS expanded the Allowable Living Expenses that it uses to help determine taxpayers' abilities to repay debts. People can now include more things under the National Standard miscellaneous allowance, such as credit card expenses and bank fees.
The IRS also clarified the process for making offers in compromise for federally-back student loans and for paying state and local tax debt as a percentage of the amount a taxpayer owes to the federal government.
With these changes, more people who owe back taxes to the IRS should qualify to settle their debts for less than the full amount they owe.
Who Can Help With Questions?
Tax laws can be confusing and the thought of dealing with the IRS may intimidate some people. Those who have tax debts and are interested in finding out if an offer in compromise may be an option for them should contact an adept tax attorney with broad experience in helping people resolve tax debts with the IRS.
Article provided by Hammond Law Group, PLLC - Tax Resolution Attorneys
Visit us at http://www.protaxcounsel.com---
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