If you’ve been following along, the changes that have been made to the IRS in this tax year have not been kind to taxpayers.
Application fees are on the rise, often by more than $100. Penalties are being kicked up. Private debt collectors have been retained to knock lose a few more dollars from taxpayers.
The latest action to come out of Washington? Make it harder to pay the taxes that you owe. According to Notice 1357, in addition to the $150 application fee (new), a taxpayer must pay 20% of the offer amount for a Cash or Lump-Sum Offer, or include a payment equal to the first proposed offer amount. Again, this is up front, ostensibly before the Service even approves the Offer. If these new requirements are not met, the Service will return the Offer as “not processable.”
So, let’s think about this. You file an Offer because one of three things apply:
- You don’t believe you owe the tax;
- You can’t pay the tax; or
- There is no doubt that you owe the tax nor that you could pay it, but an exceptional circumstance exists (this is generally an equity argument).
I would venture to say that more than 95% of the Offers that I have submitted at my office involve #2, inability to pay the tax in full. In prior years, most of these Offers are resolved to the satisfaction of the taxpayer, and I assume the Service since they were granted. The folks paid their taxes and moved on.
But now? Changes to the OIC rules have made it harder to push through an Offer. Apparently, Congress believes that folks really, really could pay, they just choose not to.
Now, taxpayers who submit an OIC must pay a $150 application fee, except in two instances:
- The OIC is submitted based solely on the premise that the taxpayer does not owe the tax; or
- The taxpayer’s total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.
The additional payment requirements as outlined above also apply.
I have encountered more difficulty trying to resolve an OIC this year than in any year past. In one instance, the agent assigned to the case admitted that there was “pressure from above” to view Offers differently than in years past (in other words, reject them summarily). In other instances, the Service has held onto to Offers for more than four or five months and then imposed arbitrary deadlines for updated information (not taxpayer’s fault!) with the threat of kicking back the Offer if the information is not received.
I can’t even begin to speculate where this is all going… I can’t imagine a scenario where the IRS is able to effectively administer the tax system with all of these fines, limitations, penalties, etc. As a practitioner, it is frustrating. At our office, we have sent two matters to Taxpayer Advocate Panel because the Service could not/would not work to resolve the issue. In my career, I have never contacted TAP before this year.
So, keep watching. I think we’re in for a bumpy ride.
I received a CP160, and I called them up. They seemed nice enough, however, got this unsettling feeling that they were trying to dig up more information on me. They asked what bank account I used for my company, and asked if I wanted to extend it, and told me it would be around 100 dollars added onto my balance, and instead of the deadline I had, it would be 100 days from now. So ultimately, I didn’t really feel the kindler, gentler, IRS, I am waiting when the two agents come knocking on my door for an interview.