The National Taxpayer Advocate has made available for download their article, “IRS Initiates New Favorable Offer In Compromise Policies”, published on The National Taxpayer Blog. The abstract is as follows:
The IRS has the discretion to accept an offer in compromise (OIC) or to release refunds it would otherwise apply against taxpayers’ tax debts through an offset bypass refund (OBR). To help taxpayers experiencing hardships TAS collaborated with the IRS to remove barriers for taxpayers considering the OIC program. Effective November 1, 2021, IRS changed its policy allowing taxpayers to keep their tax refunds once the IRS accepts their OICs and enables certain taxpayers to seek OBRs while their OICs are pending the IRS’s consideration.
What is an Offer in Compromise?
An OIC allows taxpayers to settle their tax debt for less than the full amount owed. An OIC based on doubt as to collectability, one of the three types of OICs, enables taxpayers who are unable to fully pay their liabilities to pay a lesser amount, after the IRS conducts a financial analysis, (ability to pay; income; expenses; and asset equity) and determines if the taxpayer has offered the reasonable collection potential. Being in a financially precarious position a reduced tax liability with finality is a welcome relief and for many it is the ability to start over.
New Offer in Compromise Policy
TAS and the IRS collaborated on two significant changes to the OIC refund offset policy. First, for offers accepted on or after November 1, 2021, the offer in compromise refund recoupment process, explained below, will no longer be applicable for tax periods included on the Form 656. And second, while refunds may still be offset during the time an OIC is pending, the IRS agrees that taxpayers may seek an OBR during this period, where warranted, by contacting the IRS at 800-829-1040.
Posted by Bennett Mansour, Associate Editor, Wealth Strategies Journal.