The IRS made an announcement yesterday that it is more willing to work with taxpayers this year who have become unemployed or financially strapped. In other words, the IRS is relaxing rules on income tax settlement methods such as an Offer in Compromise, which is one way a taxpayer can pay less than they owe. Moreover, the IRS will be offering taxpayers the option of meeting in person with IRS employees on certain Saturday’s at IRS offices starting March 27th. As we have stated before as a firm, the IRS wants taxpayers to be compliant and is more than willing to work with taxpayers who are communicative as well as in need.
Why More Offers in Compromise Should Be Accepted
Offers in Compromise are rarely accepted (10-15%) but now with the IRS offering more flexibility we should see an increase in acceptances. Before this announcement yesterday, the IRS would consider an Offer in Compromise using a taxpayer’s previous income history. However, now the IRS will be placing higher emphasis on a taxpayer’s current and future income as well as their job status. Many taxpayers who are struggling financially or unemployed will get offers accepted if they agree to adjust their agreement when their financial situation improves. It is important to understand that the IRS will not accept an Offer in Compromise or an offer to pay less than what you owe unless the IRS feels that you will not be able to pay in full. Other acceptable reasons include proof that amount assessed is incorrect or that if the IRS collected the full amount from you it would cause economic hardship.
Schulman did state in an interview though that if you ignore the IRS, or you fail to file a tax return that you will not be eligible for an Offer in Compromise or any other tax settlements. In general, always file a tax return as the financial consequences are much harsher than if you were to file and not pay taxes.
This recent announcement is part of a greater IRS effort to help taxpayers during these difficult economic times. The IRS has stated publicly, that for taxpayers facing financial hardship, the IRS is ready to help. Doug Schulman, the IRS Commissioner stated, “Times are tough for many people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain.” This includes taxpayers who missed installment agremeent payments, taxpayers facing tax liens that are preventing them from selling their home or refinancing, and taxpayers who need levies released (e.g. IRS wage garnishment).