IRS Offer in Compromise Program: January 2017 Edition

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According to a proposed rule set published in October 2016, the Internal Revenue Service (IRS) could soon increase the fee for its tax liability IRS offer-in-compromise (OIC) settlement program.

By hiking its cost from $186 to $300 after February 27, 2017, the agency aims to lose less money on the program. However, the IRS would not change the current fee that applies to approximately one in three taxpayers who fall under the agency’s low-income guidelines. Currently, the OIC program allows debtors who have filed their returns to settle outstanding tax liabilities for less than full price and costs the IRS an average of $2,450 per settlement to manage.

The proposed rule states, “In light of constraints on IRS resources for tax administration, the Treasury Department and the IRS have determined that it is necessary to recoup more of the costs of the offer-in-compromise program.” It acknowledges that “[t]he IRS will continue its practice of providing services subject to user fees at costs less than otherwise charged where there is a compelling tax administration reason to do so.”

The OIC program is available to taxpayers with a tax liability who meet certain eligibility requirements. Taxpayers must have filed their returns, and they have to certify doubts about the collectability of the tax as well as doubts as to their liability for the tax. According to the rules, the alleged liability cannot be disputed or under audit, and taxpayers cannot be in bankruptcy proceedings.

If approved, the change would go into effect in February 2017, although the IRS will waive the higher fees or roll it into the tax owed if the increase would cause economic hardship. The IRS has continued to express concerns over its budget, and in early 2016, the agency suggested a modification to its installment plan program – which included increasing certain fees.

For insight into whether you’re eligible for OIC relief and guidance about how to handle your IRS tax situation, please call our team today at 720-398-6088 for a private and confidential consultation.