In a broad sweeping change of the Offer in Compromise program, the Internal Revenue Service has dramatically reduced the amount required to settle an OIC. Before the changes, the IRS required that a taxpayer pay an amount equal to 48 times their excess income to settle an Offer. Now they require only 12 times the amount of excess income.
For example if a taxpayer, family or business had $5,000 of income and $3,500 of IRS allowed expenses they would have to pay the difference of $500 X 48 or $24,000 to settle their Offer in Compromise. Now, they will have to pay the difference of $500 X 12 or $6,000. This is 75% less than they required in the past! This creates a huge opportunity for people to settle their taxes for a small percentage of what they actually owe. It doesn’t matter how much they owe, the Offer is based strictly on ability to pay.
In addition, under the new guidelines many assets are exempt from the calculations. In the past, if a taxpayer had business equipment, vehicles or money in the bank they would have to pay an amount equal to the value of the asset, less any secured debt against it.
Now, if an asset is used for the production of income in a business, the taxpayer doesn’t have to add its value to the amount being offered. Also, there are exemptions for the value of vehicles and other assets.
These new rules make Offers in Compromise available to many people who didn’t qualify under the old rules. You will still need a competent tax professional to represent you in your OIC, though. The procedure in filing and negotiating an Offer is still very complicated and has many pitfalls.
For more information or for a no obligation consultation as to whether you qualify for an Offer in Compromise, please visit our website: http://www.martellelaw.org/offer-in-compromise