Since 2012 the IRS has been much more willing to compromise with taxpayers with overwhelming tax debt than in the prior decade. IRC §7122 permits the IRS to accept offers in compromise in settlement of tax obligations for less than the full outstanding tax liabilities. The willingness of the IRS to exercise this authority has ebbed and flowed through the years. In 2012 as part of its Fresh Start initiatives, the IRS greatly liberalized the standards that it uses for acceptable offers. The statistics for the most recent fiscal years are:
|Offers in compromise :||2012||2013||2014|
|Number of offers received||64,000||74,000||68,000|
|Number of offers accepted||14,000||17,000||20,000|
The 2010 Taxpayer Advocate’s report to Congress illustrates the ebbs and flow of the offer environment during the first decade of this century. The acceptance rate went up and down but never reached a 30% acceptance rates and for of the decade was in the 15% to 24% range.
In general, an offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s “reasonable collection potential.” OICs are subject to acceptance on legal requirements. To determine the taxpayer’s ability to pay, the IRS determines a value of the taxpayer’s assets and adds the value of his ability to pay in the future. The combined value of those two components is known as “Reasonable Collection Potential”(RCP).
The 2012 Fresh Start changes that caused the upward movement in the number of accepted offers included:
Revising the calculation for the taxpayer’s future income
Allowing taxpayers to repay their student loans as part of her budget
Allowing taxpayers to pay state and local delinquent taxes as part of her budget
But something to keep in mind is that without proper guidance and knowledge of the tax code, doing it alone could result in you being one of the many 70% that get denied. If you say or provide documentation the wrong way, this is irreversible and filing any subsequent filings can be impossible. let the pros handle this process for you. Our acceptance rate is over 70%. Let a tax technician speak to you regarding your personal tax situation and evaluate the best outcome for you.