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

Itemized deductions

Items, such as interest, state and local income and sales taxes, charitable contributions, and medical deductions, claimed on Schedule A of Form 1040. Itemized deductions are subtracted from adjusted gross income to arrive at taxable income. The amount of itemized deductions is also subject to a reduction when adjusted gross income exceeds certain limits.

More terms