In our 30 years of operation, we've seen a lot of rule changes with the IRS in the Offer in Compromise (OIC) program. Perhaps the biggest and most generous change was created in the Spring of 2012. A true game-changer that still resonates and has many people considering the OIC program as a way to resolve their back tax debt.
First, what is an Offer in Compromise (OIC)?
The Offer in Compromise (OIC) is a procedure used to settle tax debts with the IRS. If the IRS determines you meet certain criteria, they might agree to settle your debt for $500, for example, on the $50,000 or whatever amount you owe.
Second, what's the biggest change to the OIC rules?
Previously, IRS settlements were calculated by multiplying 48 months of one's "allowable" disposable income. Old rules: 48 months.
If your disposable income was $500, multiplied by 48 months, your settlement with the IRS would be $24,000.00* (*with many other factors to consider like assets, "allowable" expenses and statute of limitations). New rules: 12 months.
With the new rules? Only 12 months of disposable income is required or using the previous data set. $500 multiplied by 12 months, your settlement would be only $6,000.00!*
Bottom line: you pay 75% less than before!
READ PART 2: "Can You Pay Off Tax Debt Before it Expires?" in our Offer in Compromise series.