The IRS announced more flexible offer in compromise terms in IR-2012-53, May 21, 2012. Announced changes include:
- The IRS now calculates a taxpayer’s “reasonable collection potential” by looking at only 1 year of future income (down from 4 years)for offers paid in 5 or fewer months, and 2 years of future income (down from 5 years) for offers paid in 6 to 24 months. All offers must be fully paid within 24 months from the date the offer is accepted (longer term deferred OICs apparently are no longer available).
- Taxpayers may repay their post high school student loans (proof of payment must be provided).
- Taxpayers may pay state and local delinquent taxes based on percentage basis of tax owed to the state and IRS.
- Allowable Living Expense allowance categories and amounts are expanded, and national standard expenses can include credit card payments and bank fees and charges.
- Narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential.
- Equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.