|July 2013 Newsletter
|IRS Tax Resolution Software
OIC Acceptance Rates are on the Rise
A very interesting infographic has been published in June 2013 issue of the Journal of Accountancy. After declining for five years, the aggregate amount of Offers in Compromise (OICs) increased from 2010 through 2012. From 2009 to 2012, the number of OICS accepted rose to 23,268, a 122% increase.
PitBullTax Software was launched in May 2010 when OIC's acceptance rates started to go up. Is it a coincidence or what?!
By 2009, the number of OICs accepted by the IRS had fallen to only 37% of the approximately 29,000 accepted in 2002. The total amount of accepted offers had fallen as well, from more than $300 million in 2002 to less than $130 million in 2010, a 57% decrease.
The total amount compromised rose from 2010 to 2012 by a smaller percentage, 51%, than the number of OICs accepted, suggesting much of the growth may have come from smaller amounts compromised on average.
In her 2012 Annual Report to Congress, National Taxpayer Advocate Nina Olson attributed the increase to the IRS's Fresh Start Initiative, which expanded and streamlined OICs as part of the IRS's effort to help financially struggling taxpayers in the wake of the recession of 2008-2009. As part of the Fresh Start, in February 2011 (IR-2011-20), the IRS announced it was raising its OIC income eligibility ceiling to $100,000 and doubled the maximum tax liability eligible for compromise to $50,000.
In May 2012, the IRS announced (IR-2012-53) more flexible terms of OICs. These included simplifying the calculation of taxpayers' reasonable collection potential (RCP) and guidance on including payments on delinquent state and local taxes and student loans in living expenses allowed in calculating RCP. The IRS also expanded items allowable under miscellaneous living expenses to include credit card payments and bank fees and charges.
Despite the increase, Olson said in her report, OIC's remain underutilized and represent "a very small percentage of the delinquent taxpayer population."
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