IRS Announces New Offer in Compromise Rules

From the Desk of Lauran L. Stevenson

IRS Announces New Offer in Compromise Rules

The IRS announced new rules regarding an Offer in Compromise (“OIC”) application. All OIC applications received on or after March 27, 2017 will be returned if the taxpayer has not filed all required tax returns. Additionally, any application fee included with the OIC application will be returned and any initial payment made with the OIC application will be applied to the taxpayer’s balance due.

On its face, this is seemingly an insignificant change, but its effect is not insignificant. Prior to March 27, 2017, if an OIC application was filed and the taxpayer had a valid extension on file for the current tax year, it was not mandatory to return the OIC application. Now, it is mandatory for the IRS to return an OIC application if the taxpayer has not yet filed the current year return and there is a valid extension on file. For 2016, if there is a valid extension on file, this rule will not apply.