Tax Problems Blog

January 18, 2018

Offer in Compromise Program – Need for legislation to repeal the partial payment requirement.

Filed under: Offer In Compromise — Tags: , , — Administrator @ 9:57 am

January 18, 2018

An Offer in Compromise benefits the government by collecting money it would not otherwise collect. An accepted Offer concurrently provides the taxpayer a fresh start. A condition to the Offer is that the taxpayer must also file and pay their taxes for five years after an offer is accepted.

However, a current impediment to the offer program is the requirement that taxpayers who would like to consider a “lump sum” offer (payable in five or fewer installments), must include a non refundable partial payment of 20 percent of the amount of the offer. For “periodic payment” offers (an offer payable in six or more installments), a first proposed installment is required with the application, and continued monthly payments are to be made while the IRS is considering the proposal. Additionally, the IRS requires that a user fee be paid. The partial payment requirement and user fee can be waived for taxpayers with low incomes (less than 250 percent of the Federal poverty level).

The Treasury Department (report in 2017) has estimated that repealing the requirement of a partial payment would have a positive revenue impact since it may be substantially reducing access to the offer program. This is further supported by 2005 Treasury Inspector General for Tax Administration report finding that when the IRS first imposed a $150.00 Offer in compromise fee, offer submissions declined by more than 20 percent among taxpayers at every income level. Accordingly, the partial payment requirement is likely causing a decrease in collections by the government and increasing the costs of collection.

The Taxpayer Advocate has recommended that the Internal Revenue Code be amended to remove the requirement that taxpayers include a partial payment with “lump-sum” and “periodic payment” offers. [See National Taxpayer Advocate PURPLE BOOK, December, 2017].

August 18, 2017

IRS Offer in Compromise Pre-Qualifer and Doubt as to liability update

Filed under: Offer In Compromise — Administrator @ 4:55 pm

August, 2017 – Offer In Compromise Pre-Qualifier.

The IRS has an Offer In Compromise Pre-Qualifier “tool”. It is at this link

While the IRS Offer Pre-Qualifier tool may be useful to some taxpayers, the problem is that it imposes the IRS standards from the IRS tables. Thus, the IRS pre-qualifier does not take into account a taxpayer’s particular facts and circumstances as required by law. This may result in taxpayers who would otherwise qualify for an Offer, deciding not to bother because the Pre-Qualifier sets forth an unrealistic Offer amount detached from the taxpayer’s real world situation.

With the continuing push towards more and more on line “solutions” and computerized “analysis”, you can expect that the Taxpayer Bill of Rights, including the “Right to Quality Service – Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand …”, and the “Right to a Fair and Just Tax System – Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, …”) — will become mere symbolic platitudes, unless Americans demand meaningful “service” (and that doesn’t mean interface with a robot).

May 24, 2017

For those who are thinking of submitting a Doubt as to Liability Offer in Compromise, be sure to use the correct form. The IRS has issued a May, 2017 version of Form 656-L – OIC Doubt as to Liability.

See Form HERE

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