New Rules for Tax Debt Relief: Fresh Start Offer in Compromise

Last updated on June 13, 2022

Taxpayers who cannot afford to pay their entire back tax amount often use an IRS tax debt payment plan, such as an Offer in Compromise (OIC) to resolve their back taxes. Though an Offer in Compromise has strict qualifying factors, the IRS has introduced the Fresh Start initiatives that are aimed at making it convenient for taxpayers to resolve their back taxes and avoid collections.

Tax Debt Relief: New Rules for Offer in Compromise

The IRS introduced more flexibility in the evaluation of requests for an Offer in Compromise. The Fresh Start initiative for an Offer in Compromise includes benefits, such as:

• More flexibility in considering the ability to pay
• Requests for additional information are made by phone, not mail
• Fewer requests for additional financial information
• More flexibility in determining the equity in assets and allowable living expenses
• A reduction in estimated future income included in the offer
• A reduction in the timeframe for completion of the OIC payment process to two years

A Fresh Start Offer in Compromise will make processing requests and payment processes under the plan easier for taxpayers. The IRS also introduced other Fresh Start initiatives, namely the Fresh Start Notice of Federal Tax Liens and the Fresh Start Installment Payment Agreements.

Tax Debt Relief: Checking Eligibility for Offer in Compromise

Taxpayers who do not have the financial capability to pay back their entire tax debt amount can check online if they can qualify for Offer in Compromise through the new IRS tool, Offer in Compromise Pre-Qualifier.

This tool generates questions on the various important considerations for qualifying for an Offer in Compromise. Taxpayers need to include their financial information and tax filing status to calculate a preliminary offer amount. This tool is no guarantee that a taxpayer will qualify for the payment plan, it only acts as a guide.

Those residing in a U.S. Territory, foreign country, or military personnel using an APO or FPO address cannot use the Offer in Compromise Pre-Qualifier because it does not include their specific situation.

Before using this tool, taxpayers are advised to consult with a tax lawyer because it involves sharing information with the IRS. It is best for taxpayers to consider and prepare their case before judging their eligibility for an IRS debt payment plan, such as an Offer in Compromise.

Fresh Start Offer in Compromise has made it simpler for taxpayers to qualify for the much hyped and much abused tax debt payment plan. Taxpayers must carefully consider the uniqueness of their case and preferably use the help of tax services to prepare their case before sending a request for a debt payment plan. It will help them in achieving a smoother, faster and more favorable resolution.