Streamlined Offer in Compromise Program Update—June 2011

More Taxpayers now Qualify for an Offer in Compromise

In June 2011, the IRS followed up on their February announcement of the Streamlined Offer in Compromise Program, which the IRS reportedly piloted in late 2010. The program is essentially designed to open up the Offer in Compromise to more taxpayers and to make the qualification process more efficient and easier to complete for some taxpayers. It appears the IRS is attempting to more effectively settle tax debts by accepting what taxpayers can afford instead of fighting to collect dollars taxpayers simply do not have. 

All time Google searches for "Offer in Compromise"

The initial IRS announcement on February 24, 2011 about what it called the Streamlined Offer in Compromise Program sent ripples through the tax representation industry among small practitioners and large IRS representation firms alike. While the IRS announced they would open this new streamlined program to the public, they failed to define exactly what the program included. Practitioners were left wondering if and when the IRS might offer some clarification. 

For those unfamiliar with the Offer in Compromise, it is an agreement between the IRS and a taxpayer that settles the taxpayer’s tax debt for less than the full tax liability owed. Unless there are special circumstances, the IRS will not accept an Offer in Compromise if it believes the taxpayer can pay his or her tax debt in full, either as a lump sum or through a payment plan. The application process can be daunting. The IRS has historically dismissed, rejected, or disqualified somewhere around 75 percent of offers submitted by taxpayers and their representatives. 
Congress, TIGTA, the National Taxpayer Advocate, and others have repeatedly told the IRS that it needed to use the Offer in Compromise as intended to help taxpayers who could not afford to repay their tax debt. Instead of finding ways to disqualify taxpayers, the service has been encouraged to find ways to settle debts it will not be able to collect. The Streamlined Offer in Compromise Program appears to be a direct response to those criticisms. 

Benefits to Taxpayers

The Streamlined Offer in Compromise Program makes the application process easier on some taxpayers. The program requires fewer requests for additional financial information, and where additional requests are necessary, they are made by phone instead of through the mail, reducing the likelihood that a taxpayer will be disqualified from the process through errors or lack of response in paperwork. The IRS also says it is using “greater flexibility when considering your ability to pay” your tax debt, but they have not issued additional criteria they might choose to use. 

Who Qualifies?

The Streamlined Offer in Compromise Program will make the Offer in Compromise available to more taxpayers than ever before. Taxpayers who qualify for the program include wage earners, taxpayers who are unemployed, and even self-employed taxpayers who do not have other employees and whose gross receipts are less than $500,000. 

Are You Eligible?

Many Americans who owe a tax debt they cannot afford will now be eligible for the Streamlined Offer in Compromise Program. The requirements are simple. You are eligible for the program if your total household income is $100,000 or less and if your tax debt is less than $50,000 when you file your offer. 

How to Take Advantage of the Streamlined OIC Program

IRS Commissioner Shulman Announced the Streamlined OIC Program in February 2011

1. Confirm that you made less than $100,000 last year and that your tax debt is less than $50,000.
2. Confirm that you are a wage earner, unemployed, or self-employed with no additional employees and gross receipts of $500,000 or less.
3. Confirm that you cannot afford to pay your tax debt in full in a lump sum, over time through a payment plan, or by selling property to satisfy your tax debt.
4. Explore all collection options before submitting an Offer in Compromise.
5. Complete and file all your delinquent tax returns before submitting an Offer in Compromise.
6. Make any quarterly payments to the IRS that are currently due before submitting an Offer in Compromise.
7. Complete and submit an Offer in Compromise.

Get Help Now

Even the Streamlined Offer in Compromise Program is not easy to navigate. While it makes the OIC more accessible to more taxpayers, you must regain compliance and complete all forms accurately to have any hope of qualifying. TaxMasters can help. If you need assistance, hire a company who handles OIC’s every day. We will help you understand the steps you must take to regain compliance and then hand you a thorough analysis of your ability to pay your taxes along with a recommendation on what settlement or repayment option the IRS should accept. 

Call us now. Get started today. 800-581-0456.