Saturday, July 14, 2012

offer-in-compromise changes under the Revenue Act of 1998

IRS may compromise a taxpayer's tax liability for less than the full amount of the assessed balance due. An offer in compromise may be submitted for all types of taxes, as well as interest and penalties, that arise under the Code.

IRS must prescribe guidelines for its employee to determine whether an offer-in-compromise is adequate and should be accepted to resolve a dispute. ('98 Act § 3462(a); Code Sec. 7122(c))

IRS also must develop and publish schedules of national and local allowances that will provide taxpayers entering into an offer-in-compromise with adequate means to provide for basic living expenses. IRS also is required to consider the facts and circumstances of a particular taxpayer's case in determining whether the national and local schedules are adequate for that particular taxpayer. If the facts indicate that use of the scheduled allowances would be inadequate, the taxpayer isn't limited by the national or local allowances. ('98 Act § 3462(a); Code Sec. 7122(c))

The '98 Act also prohibits IRS from rejecting an offer-in-compromise from a low-income taxpayer solely on the basis of the amount of the offer. In the case of an offer-in-compromise submitted solely on the basis of doubt as to liability, IRS can't reject the offer merely because it can't locate the taxpayer's file. IRS can't request a financial statement if the taxpayer makes an offer-in-compromise based solely on doubt as to liability. ('98 Act § 3462(a); Code Sec. 7122(c))

IRS is prohibited from collecting a tax liability by levy:

(1) during any period that a taxpayer's offer-in-compromise for that liability is being processed,
(2) during the 30 days following rejection of an offer,
(3) during any period in which an appeal of the rejection of an offer is being considered, and
(4) while an installment agreement is pending. ('98 Act § 3462(b); Code Sec. 6331(k))
IRS must implement procedures to review all proposed rejections of taxpayer offers-in-compromise and requests for installment agreements before communicating the rejection to the taxpayer. IRS must allow the taxpayer to appeal any rejection of the offer or agreement to the IRS Office of Appeals and must notify taxpayers of their right to have an appeals officer review a rejected offer-in-compromise on the application form for an offer-in-compromise. ('98 Act § 3462(c); Code Sec. 7122(d))

IRS must publish guidance on the rights and obligations of taxpayers and IRS relating to offers-in-compromise, including a compliant spouse's right to apply to reinstate an agreement that would otherwise be revoked due to the nonfiling or nonpayment of the other spouse, providing all payments required under the compromise agreement are current. ('98 Act § 3462(d))

These changes generally apply for offers-in-compromise submitted after the date of enactment. The provision suspending levy is effective for offers-in-compromise pending on or made after Dec. 31, '99. ('98 Act § 3462(e)) (212) 588-1113

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