Tuesday, May 22, 2012

IRS Relaxes Debt Repayment Program

Yesterday the IRS announced that it was relaxing its rules under the offer in compromise (OIC) program. This is part of the IRS’ “Fresh Start” program, and is in response to the ongoing unemployment and financial crisis.
For example:
(1) The IRS will look at one year’s future income for offers paid in five or fewer months. This is down from four years.
(2) The IRS will look at two years of future income for offers paid in six to 24 months. This is down from five years.
Fewer months means a reduced collection potential. You can negotiate a smaller payment now. These offers must be paid within 24 months, however. This may exclude some taxpayers, but it will open the door to many others.
Many practitioners, including me, have been frustrated by the IRS’ unwillingness to acknowledge certain expenses and payments when evaluating installment agreements and OICs. The classic is credit card payments. We are presently negotiating child care payments with a revenue officer, as another example. The IRS has now expanded the National Standard miscellaneous allowance to allow for bank fees and credit card payments.
The IRS is also relaxing how it handles student loan payments when evaluating offers. It intends to do the same with state income tax obligations.
There is good stuff here.

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