The IRS has made some changed to the offers in compromise program and Income tax liens for 2010. The IRS adjusters are now permitted to consider a taxpayer’s current income and future income potential when negotiating an offer in compromise. Former practice was to judge an offer in compromise only on a taxpayer’s earnings in prior years. This provides greater flexibility when considering offers in compromise from the unemployed, or recently retired or disabled persons. However the IRS will also now require any taxpayer entering into an offer in compromise to pay more if the taxpayer’s financial situation improves significantly.
The IRS will continue to offer other help to taxpayers, including:
- Assistance of the Taxpayer Advocate Service for those taxpayers experiencing particular hardship navigating the IRS.
- Postponement of collection actions in certain hardship cases.
- Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
- Additional review of home values for offers in compromise in cases where real-estate valuations may not be accurate.
- Accelerated levy releases for taxpayers facing economic hardship.
In addition, the IRS will accelerate lien relief for homeowners if a taxpayer cannot refinance or sell a home because of a tax lien. A taxpayer seeking to refinance or sell a home may request the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. The taxpayer may also request the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.
No changes to the ability of a taxpayer to discharge income taxes in bankruptcy are expected. The interest and penalties will still be dischargable in a Chapter 13 and if the income tax debt is over 3 years old, properly filed and “aged” it will be dischargable in a Chapter 7.
Nick C. Thompson Louisville Kentucky Income Tax Bankruptcy Attorney
