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IRS Offer in Compromise Acceptance Rate Hits All-Time High in 2016

The IRS recently released their annual offer in compromise (OIC) data for 2016. Although the acceptance rate fell in fiscal year 2014 and 2015, it reached a new all-time high in 2016 with an acceptance rate of 42.86%. That is almost 1% more than the previous all-time high reached in fiscal year 2013.

An Offer in Compromise is a “proposal by a taxpayer to the Federal government that would settle a tax liability for payment of less than the full amount owed.” The IRS will not approve an OIC if it believes that the balance can be paid in full or through a payment arrangement.

The IRS Fresh Start Initiative (FSI) in 2011 made it easier to qualify for an Offer in Compromise. The Fresh Start Initiative brought changes to the IRS Offer in Compromise program. Arguably, these changes are a major reason why more tax debt settlement are being accepted recently.

It is important to note that the number of tax debt settlements through Offer in Compromise submissions decreased by 4,000, the number of Offer in Compromise accepted did not change—why the the acceptance rate reached a new all-time high.

IRS Offer In Compromise Acceptance Rates 1999-2016 Fiscal Year Acceptance Rate

Fiscal Year Acceptance Rate

1999 0.32
2000 0.294
2001 0.312
2002 0.234
2003 0.172
2004 0.189
2005 0.257
2006 0.254
2007 0.261
2008 0.25
2009 0.212
2010 0.246
2011 0.339
2012 0.375
2013 0.419
2014 0.397
2015 0.403
2016 0.429

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95% OF FLAT FEE TAX SERVICE, INC.'S CLIENTS RECEIVED A TAX DEBT SETTLEMENT THROUGH THE OFFER IN COMPROMISE PROGRAM.

Offer in Compromise Modifications

The changes the IRS made affected how the IRS calculates the RCP or reasonable collection potential of a taxpayer. Specifically, when considering a Lump Sum OIC, the IRS will only consider one year of future income. Moreover, with a Short-Term Periodic OIC, the IRS only considers 2 years of future income versus five in the past.

Total Dollar Amount of Offers in Compromise Hit an 8 Year High

The total dollar amount of offers accepted reached an 8 year high to $225,946 (in thousands). This represents a 10.35% increase in the dollar amount of OICs in FY 2016 compared to FY 2015. The total dollar amount of offers accepted represents what taxpayers paid the IRS to settle their overall tax liability.

Total Dollar Amount of Offer in Compromise Accepted (2000-2016)Fiscal Year Dollar Amount (In Thousands)

Fiscal Year Total Dollar Amount of Offer in Compromise Accepted (in Thousands)

2000 316,214
2001 340,778
2002 300,296
2003 243,942
2004 275,331
2005 325,640
2006 283,746
2007 228,975
2008 200,103
2009 157,261
2010 129,668
2011 154,092
2012 195,652
2013 195,379
2014 179,354
2015 204,748
2016 225,946

When considering an Offer in Compromise with the IRS, it is always a good idea to have a Tax Lawyer prepare and shepherd your Offer in Compromise.

CALL THE FLAT FEE TAX SERVICE, INC. TAX DEBT SETTLEMENT LINE AT: 1-800-589-3078.

FIND OUT IF YOU ARE QUALIFIED AND ELIGIBLE TO SETTLE WITH THE IRS.

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