Fresh Start Offer in Compromise

December 11, 2013 by in category irs, Taxes tagged as , with 0 and 0
Home > Blog > irs > Fresh Start Offer in Compromise

What is the Fresh Start Offer in Compromise?

What is the IRS’s Fresh Start Offer in Compromise? It’s a new service offered by the IRS through which they have taken their existing Streamlined Offer in Compromise and incorporated it as part of an umbrella investigation of offers for paying tax debt. The Fresh Start program also has greater flexibility with the financial analysis used to consider offers than the previous Streamlined Offer in Compromise program.

The Fresh Start Offer in Compromise program has a number of excellent benefits to it, including:

  • Improved and increased flexibility in determining allowable living expenses, asset equity, and a taxpayer’s ability to repay the tax that is owed.
  • Less requests for more financial documents.
  • Any requests for more information are now made by phone instead of mail, so you get the request more quickly.
  • A smaller, two-year time frame for paying Offer in Compromise settlements, so you won’t be paying back your owed taxes for years on end.
  • A reduction in the estimated future income of a taxpayer in determining the amount of an Offer in Compromise offer.
  • The Offer in Compromise Program: An Overview

    The Fresh Start Offer in Compromise Program described above is an extension of the main IRS Offer in Compromise Program. The Offer in Compromise Program lets people who owe taxes to the IRS to settle with the IRS for less than the full amount of what they owe. It’s an option that people use if they are unable to pay the full amount of their owed tax, or are unable to do so without creating a financial hardship for themselves and/or their families.

    When considering whether to extend an Offer in Compromise to a taxpayer, and the amount of the offer, the IRS takes a few things about that taxpayer into consideration, such as:

  • The taxpayer’s income
  • Equity in their assets
  • Their household expenses
  • Their ability to repay the amount of tax owed
  • Offers in Compromise are usually approved if the IRS determines the amount a taxpayer offers is the most they can reasonably expect to collect from the taxpayer. Taxpayers are generally expected to make sure they exhaust all other possible ways available to them to repay the full amount before submitting an offer in compromise. Taxpayers must also be current with their tax filings to be eligible to apply for an Offer in Compromise.

    When submitting an Offer in Compromise, taxpayers must submit 20 percent of the amount they’re offering to pay with their application. If the application is approved, the remainder of the approved amount can then be paid in one lump sum, within five payments, or in smaller monthly payments (if approved by the IRS). Monthly payments on the full amount owed must be paid during the period in which the Offer in Compromise is being evaluated for approval.

    Certain taxpayers may meet the Low Income Certification Guidelines. Those who meet these guidelines are not required to send in an initial payment with their Offer in Compromise application. People qualifying under the Low Income Certification Guidelines are also exempt from making monthly payments during the period their Offer in Compromise application is being reviewed.

    Combined with the new Fresh Start initiative to the Offer in Compromise program, more people should be able to qualify to eliminate their tax debt for less than they owe. They will also be able to qualify with less paperwork. In these tough economic times, this will be a financial relief for many people across the nation.

    Add comment