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May 2012 Changes To IRS Offer In Compromise | Tax Debt Settlement | IRS Tax Settlement | IRS Compromise | IRS Offer | Cannot Pay Taxes | Insight Law Firm May 31, 2012

Posted by Insight Law Firm in Income Tax, IRS, Tax.
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In May 2012, the IRS published new guidelines for taxpayers interested in pursuing an offer in compromise to settle outstanding tax liabilities.  An offer in compromise is an agreement between a taxpayer and the IRS under which the IRS accepts a lesser amount of money than what is owed to satisfy past tax debts.   

Under the new guidelines, an offer in compromise is likely to become a more attractive option for many taxpayers unable to pay outstanding liabilities.  Two particularly noteworthy changes include new formulas to calculate future income and expenses:

  • Future income will be calculated for 12 or 24 months instead of 48 months or 60 months.  Previously, the IRS assessed its collection potential by calculating the future income of taxpayers over a period of four years for offers that were paid in five months or less and five years for any other offers.  Now, the IRS will consider taxpayers’ income only for a one year period for offers paid in five months or less and two years for any other offers. 
  • Student loans and minimum credit card payments may be calculated as a miscellaneous expense.  The IRS has also changed the parameters of the miscellaneous expenses taxpayers can claim when proposing an offer.  The expenses claimed by taxpayers in an offer in compromise are evaluated against national expense standards for those basic living expenses.  Now, taxpayers can include new expenses, including bank fees, bank charges, credit card payments, and student loan payments within the miscellaneous expense category.

Washington taxpayers interested in learning how these changes may affect their ability to settle their outstanding tax liabilities with an offer in compromise can call Insight Law for a free consultation at (206) 397-4780, or visit our website link below to speak with a tax attorney.

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