January 09, 2013 /24-7PressRelease/
-- Many people are struggling financially as a result of the underperforming economy. In 2012, the IRS expanded its Offer in Compromise program to give those burdened with tax debts a chance to settle them and make a fresh financial start. People with tax debts should understand what the OIC program is, the changes the IRS made and how those changes may benefit taxpayers.
What is an Offer in Compromise?
The Offer in Compromise program allows taxpayers to make proposals to the IRS to settle outstanding tax debt
for amounts less than the full amount they owe when paying the whole debt would cause financial hardship. The IRS usually accepts offers that are the most that the IRS could expect to collect from the taxpayer within a reasonable amount of time.
The IRS considers several factors when determining whether to accept an offer under the OIC program, such as the taxpayer's:
- Ability to pay
- Equity in assets
What changes did the IRS make to the OIC program?
The IRS has changed the way it calculates future income when considering a taxpayer's collection potential to see whether the taxpayer qualifies under the OIC program. The IRS will now only consider one year's worth of future income for offers that will be paid within five months, instead of four years' worth of income as they previously did. For offers that will be paid within six to 24 months, the IRS will only consider two years' income, down from five years. Additionally, the IRS will no longer include income-producing assets in income calculations for small businesses.
In addition to changing income calculations, the IRS adjusted the Allowable Living Expenses it uses to determine taxpayers' ability to pay. People may now include more under the National Standard miscellaneous allowance, such as bank fees and credit card expenses.
How will the changes help taxpayers?
The changes to the OIC program benefit taxpayers in several ways. The new eligibility requirements make it more likely that the IRS will accept taxpayers' offers. Taxpayers may also end up settling their debts for less money than they would have under the previous OIC guidelines.
The new guidelines can be particularly beneficial to those filing bankruptcy
who have tax debts. Certain types of tax debts, such as Employer's Federal Unemployment Tax and Employer Quarterly Federal Tax Returns, are not dischargeable in bankruptcy so even after filing bankruptcy people need to contend with these debts. The new OIC guidelines offer people a better chance to reform their financial situations in conjunction with filing bankruptcy.
If you are having financial difficulties that include tax debts, speak with an experienced bankruptcy attorney who can help advise you of your options for debt relief.
Article provided by Rothschild & Ausbrooks, PLLC
Visit us at www.rothschildbklaw.com