There may be some good news for taxpayers with problems since IRS loosened up the rules for relief in 2012, according to recently-released reports by the agency.
The IRS changes for granting tax relief recognize the downturn in the economy.
From 2012 to 2013 the number of so-called "offers in compromise" (proposed agreements by taxpayers to IRS to discount back taxes) increased from 64,000 to 74,000. And, more importantly, the number of offers accepted jumped from 24,000 to 31,000 -- a 29% increase.
Likewise, the IRS seems to be moderating its forced collection efforts. IRS levies on bank accounts and paychecks dropped from 2,961,162 to 1,855,095 -- a 37% decrease. And the number of seizures dropped from 733,000 to 547,000, which amounts to 25% fewer seizures of property.
Says Morgan King, a California attorney and tax relief expert: "Clearly, the new policies are making it feasible for more honest but delinquent taxpayers to wipe the slate clean, become compliant with the tax laws, and get a fresh start."
"Most delinquent taxpayers," says King, "do not deliberately fail to pay their taxes when due. In most cases there is a small business failure, a serious illness, drugs, divorce, and similar causes. Once they get behind, they tend to go into avoidance until penalties and interest skyrocket the debt. At that point, they need a lawyer."
Still, says Kings, taxpayers need to beware of the tax relief scammers who advertise heavily, but deliver little: King notes that the percentage of accepted offers would be higher if only professionally drafted, competent offers are counted. "The acceptable rate is lower than it should be because so many ʻoffer mills,ʼ like the ones advertising on T.V., are slap-dashed together and sent to the IRS so poorly prepared that they are basically dead-on-arrival."
The new IRS changes generally focused on the financial analysis used to determine which taxpayers qualify for an OIC ("offers in compromise"). The changes enable some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.
The IRS looks at the taxpayer's income and assets to make a determination of the taxpayer's "reasonable collection potential." OICs are subject to acceptance on legal requirements.
When the IRS 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, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted.
For more details, contact our office. We specialize in resolving tax and debt matters.