April 22, 2020 11:12 pm

Final Regulations on Offers in Compromise

An offer in compromise (OIC) is an agreement that a taxpayer can reach with the IRS to settle an outstanding tax debt at less than the full amount under special circumstances. The taxpayer must show that continuing to pay off all that’s owed could be a financial hardship and that merely having more time would not help the situation. Final regulations set the fee for obtaining an OIC and clarify some matters (T.D. 9894, 3/12/20).

Until now, the user fee for requesting an OIC has been $186. Proposed regulations in 2016 had suggested that the fee be raised to $300. Final regulations set the fee at $205. The $205 fee applies to OICs submitted after April 26, 2020.

Low-income taxpayers are exempt from paying the fee. The final regulations define these individuals as having adjusted gross income (AGI) that does not exceed 250% of the applicable poverty level. This is determined by the taxpayer’s household size and AGI reported on the most recent tax return.

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Tax Glossary

Material participation tests

Rules for determining whether a person is active in a business activity for passive activity rule purposes. Unless the tests are met, passive loss limits apply.

More terms