More Flexibility for Offers in Compromise

An offer in compromise (OIC) is an arrangement with the IRS to pay less than the full tax amount owed for those suffering certain financial hardships. The IRS announced an expansion of the program to enable most financially-distressed taxpayers to clear up their tax problems more quickly than in the past.

Changes to the OIC program include:

• Resolution of tax problems in as little as two years (compared with five years in the past).
• Revisions to the calculation of a taxpayer’s future income taken into account in determining an OIC.
• Factoring in repayments of student loans.
• Expansion of the Allowable Living Expense allowance category and amount, which is used to determine how much a taxpayer can be expected to pay after factoring in his or her living expenses.

These changes are part of the IRS’ Fresh Start initiative designed to give taxpayers the opportunity to clear up their tax problems once and for all.