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Tuesday, May 29, 2012
The IRS recently announced more changes to its offer-in-compromise (OIC) program as part of its “fresh start” initiative designed to help financially distressed taxpayers in IR-2012-53 (5/21/12). The most recent changes focus on the financial analysis used by the IRS to determine whether a taxpayer qualifies for an OIC, as set forth in the Internal Revenue Manual (IRM Parts 5.8 and 5.15). The changes include:
According to the IRS, the changes described above “will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.” To be fair, the IRS has made progress under its streamlined OIC program having accepted 19,562 OICs in FY 2011(up 41% over FY 2010) and a 20% overall rejection rate (down from 25% in FY 2009), according to the IRS National Taxpayer Advocate’s 2011 Annual Report to Congress. However, without more meaningful details such as the total number of OICs submitted, total rejected as “non-processable” and total rejected after full consideration, practitioners remain somewhat skeptical regarding whether there has, in fact, been a meaningful increase in OIC acceptance rates sufficient to justify recommendation to clients in lieu of an installment agreement or even bankruptcy given the up-front user fee and 20% deposit requirement for lump sum OICs required by Congress under §7122.For a further discussion of offers in compromise, see 638 T.M., Federal Tax Collection Procedure – Defensive Measures.Kenneth S. Savell, J.D., LL.MIRS Practice and Procedure Group
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