The IRS has recently announced some important changes to the Offer in Compromise (OIC) program that should be noted. Effective for OIC’s submitted after March 27, 2017 the IRS will return any Offer submitted if you have not filed “all of the required income tax returns”. If an OIC is submitted without all of the required tax returns being filed, the IRS will return the Offer and keep the 20% deposit. There are no appeal rights.
This is a substantial change from the past IRS practices in two regards.
First, in the past the IRS only required that the last six (6) years of tax returns be submitted. So for example if you had ten (10) years of unfiled tax returns and you planned to submit an Offer, you would only have to go back six (6) years and file these last six (6) years tax returns prior to submitting the Offer.
Secondly, if all required tax returns had not been submitted, the IRS would send you a letter advising of such and provide the taxpayer with thirty (30) days to correct the situation and file the required tax returns.
What is interesting to note, is that the IRS does not require you to go back more than six (6) years if you do not plan to submit an Offer. So contrast the above situation with someone that plans to enter into payment arrangements with the IRS, the Internal Revenue Manual states that the taxpayer usually only has to file that last six (6) years of tax returns in order to get into compliance.
The above changes are available to read at https://www.irs.gov/individuals/offer-in-compromise-1 . If you have any questions or would like to know how these changes could impact your situation please call our office at (248) 524-5240.