Offer in Compromise

SBS CPA Group has dedicated the month of July to blog posts focusing on what you can do if you can’t pay your tax bill in full when due.

The IRS has recently initiated a “Fresh Start” initiative to help people hit during this economic downturn.  Last week, we focused on Installment Agreements; this week, we are going to focus on “Offer in Compromise”.

An offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

With this “Fresh Start” initiative, the IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations.

For example, the IRS has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.  Some of the “Fresh Start”: changes include:

      • 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.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Our Fort Wayne CPA’s have the knowledge and experience to guide you through these difficult times.  Please contact our Fort Wayne tax preparation firm at 260-338-0833 us today if you have any questions.

Information used in this article was sourced from

  1. IRS Tax Tips, Issue Number: 2012-48 written on March 12, 2012.
  2. IRS Newswire, Issue Number IR-2012-53 written on May 22, 2012

Brent Bracht

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