Tax Brake with Robert G. Nath, Esq.

Normally, offers are made when the taxpayer shows an inability to pay. Recent law changed that slightly: an offer is available even if the taxpayer can pay in full, but doing so would create an economic hardship. Now, the IRS tells us what that standard means.

In brief, it means the inability to pay “reasonable basic living expenses.” The IRS has charts for this, based on number of people living in the household and other standards. However, agents tend to use these charts without any chance at deviation. Now, the regulation says the IRS is to consider other relevant data, such as the taxpayer's age, employment status and history, number of dependents, and other “unique circumstances.” Among these could be long-term illness, medical condition or disability where it is foreseeable that the taxpayer's finances will be exhausted for that care. Or, the taxpayer has a monthly income but that is exhausted in caring for dependents with no other means of support.

Of course, the regulations specify that if the IRS finds acceptance would “undermine voluntary compliance,” it may reject the offer. Examples of this would include the taxpayer's history of non-filing and non-payment of taxes, or other “deliberate actions” to avoid the payment of taxes.

If an offer is rejected, there is an appeal available within the IRS, and a very limited appeal to the courts. However, it is almost always in your interest to resolve cases at the offer level, rather than taking an appeal.

Don't count on many offers going through on this basis. However, there are circumstances that fit the criteria and where it may seem reasonable to try.