The IRS 2012 Offer in Compromise Rule Changes:  Offer up to 75% less?!

Washington Tax Services and our numerous clients were pretty stoked by the IRS rule changes for the Offer in Compromise instituted in 2012.  While there are a number of small changes that are relevant - the biggest change is the computation of disposable income. 

48 months reduced to 12 months.

Previously , you were required to pay the equivalent of 48 months of future disposable income  

Now you are only required to offer 12 months of disposable income.

This is a huge reduction for most taxpayers.   For example -- a taxpayer with $800 of disposable income - (with no serious assets and who can't pay his debt within the Collection Statute).  would qualify previously for a settlement of $38,400.

Now - $9600.00.

State payments now allowed

About 10 years ago or so our staff was shocked when the IRS Offer dept. sent out a memo saying State tax payments were NOT considered allowed for IRS Offer purposes.  It seemed pointless...if you have to pay the State you have to pay the State.  Well - sober minds prevailed as they reinstituted this provision.

Dissipated Assets -- time frame reduced

If you sell or transfer an asset and you do an Offer in Compromise - the IRS considers that still an asset - albeit a dissipated asset.  The time frame they previously looked at was 5 years.  That has been reduced to 3 years.

There are other changes which our staff can explain to you when you call us at 1-888-282-4697.

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