Offer#in#Compromise: Settling#your#Client’s#Tax#Bill#with#the#IRS Moving#Your#Practice#in#the#Right#Direction# A"Practice"Essentials"Presentation

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2011-2012 Fresh Start Initiatives
These materials update the original Offer in Compromise Program
Supplemental Notes
!  Direct Debit Installment Agreements and Liens
!  The IRS has made several fundamental changes to liens in cases where taxpayers
enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid
assessments of $25,000 or less, the IRS will now allow lien withdrawals under
several scenarios:
!  Lien withdrawals for taxpayers entering into a Direct Debit Installment
!  The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement
converts to a Direct Debit Installment Agreement.
!  The IRS will also withdraw liens on existing Direct Debit Installment agreements
upon taxpayer request.
!  Liens will be withdrawn after a probationary period demonstrating that direct
debit payments will be honored.
2011 IRS Updates
!  Tax Lien Withdrawals
!  The IRS will also modify procedures that will make it easier for taxpayers to
obtain lien withdrawals.
!  Liens will now be withdrawn once full payment of taxes is made if the
taxpayer requests it. The IRS has determined that this approach is in the
best interest of the government.
!  In order to speed the withdrawal process, the IRS will also streamline its
internal procedures to allow collection personnel to withdraw the lien
2011 IRS Updates
!  Installment Agreements and Small Businesses
!  The IRS has streamlined the Installment Agreement process to make it available to
more small businesses. The payment program will raise the dollar limit to allow
additional small businesses to participate.
!  Small businesses with $25,000 or less in unpaid tax can participate. Previously, only small
businesses with under $10,000 in liabilities could participate. Small businesses will now
have 24 months to pay.
!  The streamlined Installment Agreements are available for small businesses that file
either as an individual or as a business. Small businesses with an unpaid assessment
balance greater than $25,000 would qualify for the streamlined Installment Agreement
if they pay down the balance to $25,000 or less.
!  Small businesses will need to enroll in a Direct Debit Installment Agreement to
2012 Changes to the OIC Program
!  Streamlined Offer in Compromise Process
!  The Internal Revenue Service is now offering more flexible terms in its Offer in
Compromise program (OIC). A few of the key points below:
!  Taxpayers may be able to repay their student loans and pay their delinquent state
and local taxes under the latest phase of the IRS’s Fresh Start initiative.
!  Many of these changes focus on the financial analysis used to determine which
taxpayers qualify for an OIC.
!  Other revisions affect the calculation of the taxpayer’s future income and
expanding the allowable living expense allowance category and amount.
!  The net result of the changes will be that some taxpayers will be able to resolve
their IRS problems in two years compared to four or five years in the past,
according to the IRS.
2012 Changes to the OIC Program
!  Streamlined Offer in Compromise Process
!  As we said, when the IRS now calculates a taxpayer’s reasonable collection potential,
it will now look at only one year of future income for offers paid in five or fewer months.
!  Prior to the changes, the IRS looked at four years; and two years of future income for
offers paid in six to 24 months, down from five years. But, all offers must be fully paid
within 24 months of the date the offer is accepted.
!  Other changes to the program include narrowed parameters and clarification of when
a dissipated asset will be included in the calculation of reasonable collection potential.
!  Going forward, equity in income producing assets generally will not be included in the
calculation of reasonable collection potential for on-going businesses.