Under the latest phase of the IRS’s Fresh Start Initiative, even more taxpayers will qualify to repay their student loans or pay off their delinquent state and local taxes with an Offer In Compromise (OIC.) This is due in large part to a change in the financial analysis that determines who qualifies for the OIC. Other changes include revising the calculation of the taxpayer’s future income and expanding the allowable living expense allowance category and amount. According to IRS Commissioner, Doug Shulman, these changes are “part of our multiyear effort to help taxpayers who are struggling to make ends meet.”
Now, when the IRS calculates a taxpayer’s reasonable collection potential, it will look at only one year of future income for offers paid in five or fewer months, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. Additionally, the IRS is allowing taxpayers to use miscellaneous allowances for expenses such as credit card payments and bank fees. These changes are part of the ongoing effort the IRS has been working on to create OIC programs that more closely reflect real-world situations.
For more information on these new breaks and other helpful tax initiatives, visit Accounting Today.