IRS announces waivers for Offer in Compromise applications

         The Internal Revenue Service today announced the release of final regulations that increase the Offer in Compromise application fee to $205 and provide an additional way for the IRS to waive the Offer in Compromise application fee for low-income taxpayers, based on their adjusted gross income (AGI).

          As Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS to settle a tax debt for less than the full amount owed. Generally, it may be an option for taxpayers who can’t pay their full tax debt, or if doing so will create a financial hardship. The IRS considers the taxpayer’s overall financial circumstances when considering an OIC in an effort to administratively resolve the amount due.

          Applicants who meet the definition of a “low-income taxpayer” receive a waiver of their OIC application fee. A new provision provides an additional way for low-income taxpayers to qualify for a waiver of the OIC application fee.

          Normally, the IRS determines if taxpayers fall at or below 250% of the poverty level by looking at their household’s size and gross monthly income. The new law now also look at a taxpayer’s AGI from the most recent tax return to determine whether it is at or below 250% of the poverty level.

          Taxpayer’s with an outstanding tax debt are encouraged to timely respond to IRS notices and should not ignore correspondence received from the IRS.