Although the number of Internal Revenue Service (IRS) offers in compromise (OIC) received increased by 9.98% in 2021, the number of offers approved only increased by 6.06%. Therefore, the IRS OIC acceptance rate for 2021 fell by 1.1% to 30.7% in comparison to 2020. 30.7% represents a differential of 12.1% from the OIC all-time acceptance rate high of 42.8% back in 2016. Moreover, the average amount per offer in compromise accepted increased by 3,520.24 or 31.83%.

As of April 25, 2022, the IRS has increased its Collection Financial Standards. These standards are budgetary allowances the IRS uses when assessing a taxpayer's ability to pay delinquent taxes. The standards refer to the amounts the IRS determines are allowable, reasonable, and necessary for taxpayers in regards to common household budgetary categories. aThey are based on the Bureau of Labor Statistics, U.S. Census Bureau, and American Community Survey.

On November 15, 2021, the Taxpayer Advocate Service (TAS), an independent IRS unit, announced two significant changes to the IRS Offer in Compromise (OIC) program, which are favorable for taxpayers who owe federal taxes. This new policy in OICs marks a significant shift for the benefit of taxpayers with accepted offers. It will also help taxpayers experiencing financial hardships. The TAS collaborated with the IRS to remove some obstacles for taxpayers considering an OIC. An OIC allows taxpayers to settle their tax liability for less than the full amount owed for the tax year(s). An accepted offer benefits the taxpayer by bringing welcome tax liability finality for the tax year(s) included in the offer.

I meet many tax preparers who say “I don’t do foreign account reporting”. This is so wrong. If you touch a tax return, you need to ask each and every client a series of questions to ensure that any foreign financial accounts and assets are reported. The IRS is looking closely at taxpayers as well as their preparers, to see what questions were asked and what guidance was provided. 

As I was going about my day, I received automated robocalls (one of many over the last few months) from a so-called Mary Fletcher discussing how as a state resident I may want to consider enrolling in the new tax compromise program provided by the American Rescue Plan Act of 2021. I also received another from Eva Smith, about the Offer In Compromise program that is “now open for enrollment.” As soon as I received the message, I knew it was false or misleading. Here is a transcription of the voicemails I received (and many others probably received) and what you should do if you are facing tax problems.