House Ways and Means Oversight Committe Chairperson Charles Lewis and Ranking Member Charles Boustany have introduced H.R. 2343, the Tax Compromise Improvement Act of 2009.
The bill would eliminate the requirement of IRC 7122(c) that lump sum offers must be accompanied by an upfront payment equal to 20% of the value of the compromise. The bill would also eliminate the requirement that periodic payment offers must have the proposed payments made while the compromise is pending. All of these payments are nonrefundable – meaning if the compromise is rejected, the money is lost.
The offer in compromise program has had offer submissions declining 21% since the upfront payment requrement took effect in 2006. The IRS Taxpayer Advocate conducted a study finding that 56% of these payments were borrowed from friends and family members.
The proposed changes are a much needed first step to restore the offer in compromise program to viability and give deserving taxpayers who have had economic problems – usually through job loss, medical problems, divorce or business failure – a fresh start on their taxes.
The bill was introduced from hearings the Ways and Means Oversight Subcommittee conducted on February 26, 2009 as to assisting taxpayers with economic difficulties. IRS Taxpayer Advocate Nina Olsen submitted testimony to the Oversight Committee recommending the change. You can read my written testimony to the Oversight Committee on helping taxpayers in distress here.