The IRS has announced an expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. It can only be done if the IRS believes the liability can’t be paid in full as a lump sum or through a payment agreement. This determination is made by looking at the taxpayer’s income and assets. The new expansion of the OIC program includes, in certain circumstances:
- Revising the calculation for the taxpayer’s future income
- Allowing taxpayers to repay their student loans
- Allowing taxpayers to pay state and local delinquent taxes
- Expanding the Allowable Living Expense allowance category and amount.
In determining a taxpayer’s ability to pay, the IRS uses Allowable Living Expense Standards. These are now expanded to include credit card payments, bank fees, student loans guaranteed by the federal government and delinquent state and local income taxes.
In addition, this expansion enables some taxpayers to arrive at a resolution in as little as two years for what used to be an up to five year process.