Changes to the Offer In Compromise Program

Approximately two weeks ago the IRS announced a new set of rules to help determine if a taxpayer is eligible for an Offer In Compromise. One of the biggest changes is in the number of months of disposable monthly income (i.e. income minus allowable expenses) one has to add to the amount of his offer. It has dropped from 48 to 12 months. For example, if one has $100.00 in disposable monthly, under the old rules he would have to increase his offer by $4,800, but under the new rules he would increase his offer by only $1,200. Another change is the manner in which “dissipated assets” are handled. A dissipated asset is one which the taxpayer has sold and used the money for a purpose other than paying the IRS. The IRS adds this value to the amount one has to offer. The IRS now allows some of these types of assets to be ignored. Finally, student loans and monthly payments to State taxing authorities are now counted as valid expenses. Other minor changes will also help to lower the amount one must pay in order to have a successful Offer. Now is a great time to pursue an Offer in Compromise.