Accounting News

Thursday, May 24, 2012
Offers in Compromise Now Easier

The IRS has announced that they are changing the terms for accepting offers in compromise. The changes are to make the system more flexible. Offers in compromise are used by taxpayers to clear up due taxes but need to set up a payment plan.

The biggest change is how the IRS determines the eligibility of the taxpayer. They will now use just one year of estimated income if the total will be paid off in less than five years. Previously the analysis was based on four years of estimated income. If the payments will be paid over six months then the calculation moves from five years of income to two years. 

These changes are part of the Fresh Start program. The program is to offer relief to taxpayers who owe taxes and are under financial distress. It benefits everyone to get some taxes collected in a reasonable way. As my mom always liked to tell me, "you catch more flies with honey."

If you are a delinquent taxpayer and need to get an offer of compromise then an accountant experienced with the IRS is your best option. They can get a reasonable offer that you can pay. The penalties and interest only increase when back taxes are ignored. It is much better to take care of the problem when it arises.

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