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Alert: Tighter IRS ‘offer in compromise’ rules

On first blush, it seems to be more evidence the IRS is taking a sterner stance on collections. A new announcement from the agency makes it tougher for some individuals seeking to get out from under tax liabilities starting next week.

Specifically, anyone in Minnesota considering the route of seeking to use the Offer in Compromise program to resolve outstanding tax obligations will need to exercise greater due diligence as of March 27. Understanding all your options and the shortfalls of failing to meet the new criteria is something to discuss with a skilled attorney.

For those who may be unfamiliar, the Offer in Compromise program is a settlement worked out between the IRS and a taxpayer who faces an outstanding tax burden but who lacks the resources to cover the obligation. By entering into an OIC agreement, it is possible to see total liability significantly reduced.

In order to qualify for OIC relief, however, the taxpayer has to agree to certain provisions. These include agreeing to file any required tax returns and meeting all agreed-to payments. You’ll have to surrender any refunds that might be due and any liens in place remain in place until completion.

The new rule just rolled out further tightens the standards under which an OIC will be allowed. It says that any OIC application made as of March 27 of this year will be returned if any previously required tax returns haven’t been filed. The twist in the rule is that any initial payment made in connection with that application will be forfeit and put toward the balance owed.

If you can’t pay the full amount of your tax obligation for some reason, seeking an OIC might be a good idea. However, the conditions have to be right and the legal criteria properly met to avoid difficulties.

Findlaw Network


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