The IRS has done quite a bit of expanding on its Fresh Start Initiative
this month. As part of that, the IRS has decided to offer more flexible terms for its Offer in Compromise program
. The IRS will no longer your possible future income for the next five years. Instead, it will only to your possible income for one year if you agree to pay in five or fewer months. Alternatively, if you agree to pay your debt in six to twenty-four months, the IRS will only look at your possible income for two years.
The Offer in Compromise program will now allow you to pay your delinquent student loans, state taxes, and local taxes. In fact it has expanded the Allowable Living Expenses
categories and amounts. For instance, If you are set to finish paying off a $425 car loan for your primary vehicle during the next year, the IRS will not $400 of that payment. This means, once you're done paying off that car loan, you will only be $25 richer in the eyes of the IRS, instead of $425 richer. However, any amount you spend over the maximum standard will not be allowed. If you are a single taxpayer, you will be allowed up to $517 a month for your car, and you will only be allowed one car. If you're paying more than that, it is the IRS' opinion that you should trade down for a cheaper car. You can read about these changes in IRM 5.8.5
Now, just because the IRS has changed its terms to be more flexible for today's struggling taxpayers doesn't mean that you should go out there and start filling out paperwork. There is a good chance you still may not qualify for a settlement. You need to talk to an honest tax professional about what your chances truly are. If he or she seems to think you actually have a shot at getting an offer, you should not handle the paperwork on your own. The financial paperwork is confusing and complicated. Even if you are the perfect candidate for an Offer in Compromise, messing up the paperwork can ensure that your offer is declined.
And, submitting for Offer in Compromise comes with a great deal of risk. When you send in the 433-B, you must give the IRS all of the following:
- Full financial disclosure, that will show the IRS exactly where to levy you if they need to.
- A non-refundable $150 application fee.
- A non-refundable 20% down payment of your offer.
The IRS can take up to two years to review your offer. During that time, penalties and interest will continue to accrue on your debt. The IRS may also place a Federal lien on you, which can only be removed by satisfying the full amount of your tax debt.
If you want to see whether the Offer in Compromise or another IRS program is the right choice for you, give me a call at 888-415-1337
or fill out the submission form
. You'll get a free, no-obligation consultation with the best tax specialists in the industry!