Most of us in the Bay Area file our tax returns like clockwork. Many of us get a refund after the tax deadline. Some of us find that we owe money to the Internal Revenue Service. When we owe a lot of money or we don’t have the cash on hand, we may put off paying the IRS without discussing it with them. Fines and penalties begin to accrue and then, seemingly overnight, there is a huge tax debt.
What can be done? If we assume you want to continue living in the United States, you will need to work towards coming to an agreement with the IRS. A recent news article points out the advantages of working with the IRS to agree on an Offer in Compromise, or OIC.
An OIC is an agreement a taxpayer makes with the IRS in which the taxpayer agrees to pay less than the given amount over a specified period of time. At the end of that time, if the tax payments have been made, the tax obligation also ends. In order to come to an agreement on the amount, the IRS will look at a taxpayer’s total income and expenses to make sure the taxpayer can maintain the OIC commitment.
Recently it was reported that a few changes have been made to the OIC. Those changes include:
- Revised calculation of future income
- Allow taxpayers to repay their student loans
- Allow taxpayers to pay delinquent state and local taxes
- Expand the Allowable Living Expense
- Allow credit card minimum payments as an expense
The IRS expects the reduced amount of tax liability to be paid within 24 months. An OIC can involve some back and forth negotiation which someone with the power of attorney can do on the taxpayer’s behalf.
Source: examiner.com, “Do you owe the IRS? Make them an Offer!” Tynisa Gaines, July 25, 2012
At our San Francisco Bay law office, we represent clients in negotiations with the IRS including OIC work as described in this post.