IRS Imposes New Offer in Compromise Requirements

Executives at FSI Tax Corp are alerting taxpayers to new IRS requirements that will likely make the Offer in Compromise process even more difficult for applicants.

The changes, which took effect on July 16, require taxpayers to include a non-refundable down payment of 20 percent of proposed cash settlement offer amounts with their OIC application.

Critics of the change, including the American Institute of Certified Public Accountants, the New York State Bar Association and National Taxpayer Advocate Nina Olson, argue that the new requirements will likely decrease the number of OIC applicants and this will, in turn, decrease much-needed revenue opportunities for the IRS.

“The Offer in Compromise program enables the IRS to collect on old tax debt which already has a low probability of collection,” explained FSI Tax Managing ATR Michael Smith. “Creating additional obstacles for taxpayers will not help the IRS collect the full amount of the tax debt and could place undue hardships on taxpayers who would otherwise apply for the program.”

The new down payment requirement is part of the Tax Increase Prevention and Reconciliation Act of 2005 that arose from a January 2005 report from the Joint Committee on Taxation. Their report projects that this change would raise tax revenue and help prevent abusive OIC practices.

An offer in compromise is a payment option for eligible taxpayers to settle the unpaid tax debt with the IRS for less than the total amount owed.

“The Offer in Compromise program is one of the methods FSI Tax Corp utilizes to help scores of taxpayers become compliant with the IRS,” explained Smith. “Complicating the process with a 20 percent down payment for cash offers will discourage struggling taxpayers who are just trying to pay their taxes to the best of their ability.”

The law also includes a provision that the OIC offer is automatically accepted if the IRS does not make a decision on the offer within two years of the offer’s submission.

About FSI Tax Corp:

FSI Tax is a tax resolution company headquartered in Columbia, MD, since January 2004. FSI Tax’s team of tax professionals is dedicated to helping taxpayers resolve their tax debt through various programs available from the IRS and state tax agencies. FSI Tax services include tax resolution through Offer in Compromise, Installment Agreement and other available tax relief programs. For more information, please call FSI Tax Corp at 1-877-4-FSI-NOW (1-877-437-4669) or visit www.fsitax.com.