Taxpayers look to reduce their back taxes, but not every taxpayer can qualify for the tax debt reduction plan Offer in Compromise. Only taxpayers whose financial situation is such that any collection of back taxes can push them into a financial crisis may qualify for an Offer in Compromise.
Under this IRS program, taxpayers have their total tax debt amount reduced into a settlement amount that must be paid within the requirements of the Offer in Compromise.
The IRS has begun its Fresh Start initiative for the Offer in Compromise program, adding more flexibility to the approval process. The new Streamlined Offer in Compromise program makes the IRS process easier and quicker. Now, the IRS allows for more flexibility when considering a taxpayers’ ability to pay, determining the equity in assets, and calculating allowable living expenses.
There will be fewer requests for additional financial information along with a reduction in the amount of future income included in the offer. This will make it easier for taxpayers to pay their debt under this program. However, the IRS reduced the timeframe to complete the Offer in Compromise payment process to two years.
Taxpayers may consult a tax professional to ensure they qualify for this tax debt payment plan. It is important to fulfill the eligibility requirements because the IRS charges a penalty for applying for a program a taxpayer clearly does not qualify for.