The Tax Times: Revised Offer in Compromise Procedures - Not Current on ALL Tax Filings No OIC

Wednesday, May 18, 2016

Revised Offer in Compromise Procedures - Not Current on ALL Tax Filings No OIC

The IRS is taking a close look at the Offer in Compromise program recently.

On March 30, 2016 we posted IRS Revises Offer in Compromise Booklet and Application where we discussed that the 2016 revision to Offer in Compromise Booklet Form 656-B will is available for download. The booklet contains necessary forms and instructions for submitting an Offer in Compromise. Use of earlier versions may result in a delay in the processing of Offer applications.

Now the IRS has released its new policy that effective immediately, the IRS will return newly filed Offer in Compromise (OIC) applications in cases where the taxpayer has not filed all required tax returns (e-News for Tax Professionals 2016-19- May13, 2016). Any fees included with the OIC will also be returned.

This new policy does not apply to current year tax returns if there is a valid extension on file.

In the past, pursuant to Internal Revenue Manual 1.2.14.1.18 and Policy Statement 5-133, enforcement of delinquency procedures was applied for not more than six (6) years of unfiled returns. Enforcement beyond such period was not undertaken without prior managerial approval. The IRM 1.2.14.1.18 is still not updated since 08/04/2006. Whether this new policy requires an update to this IRM remains to be seen, since the update only concerns Offer in Compromise procedures.

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances including:

Ability to pay;
Income;
Expenses; and
Asset equity.

The IRS generally will approve an offer in compromise when the amount offered represents the most that the IRS can expect to collect within a reasonable period of time. Explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone.

Please make sure your or your clients have filed ALL required tax returns before attempting to submit an OIC package.

The IRS reminds Taxpayers

that if they hire a Tax Professional

to help them file an Offer in Compromise,

Be Sure to Check their Qualifications!

Make sure you are eligible

Before the IRS can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding. Use the Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal.

the IRS is in the process of making modifications to the Pre-Qualifier Tool application. If you use this tool, please consider making the following adjustments to your displayed results.

If you enter an amount on Screen 3 Assets, Line 1 which reads "Total bank Balances," you may reduce this amount by $1000. The result may not be less than zero.

If you enter an amount on Screen 3, Vehicle 1, you may reduce this amount by $3450. The result may not be less than zero.

If you enter an amount on Screen 3, Vehicle 2, and you are making a joint offer with a spouse or other party, you may also reduce this amount by $3450. The result may not be less than zero.

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