WASHINGTON, DC - Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) and Ranking Member Charles W. Boustany, Jr. (R-LA), today introduced H.R. 2343, the Tax Compromise Improvement Act of 2009, legislation that would help struggling taxpayers enter into offer-in-compromise (OIC) agreements with the Internal Revenue Service (IRS). OIC agreements are an important collection alternative for the IRS and taxpayers. Many taxpayers seeking to enter into OIC agreements have recently lost jobs or are experiencing financial difficulties.
Taxpayers can apply for an OIC agreement with the IRS to settle their unpaid taxes. Under current law, because of legislation passed in 2006, a taxpayer offering to settle a tax liability must make a partial payment with submission of an OIC application (e.g., a nonrefundable, 20-percent down payment). If the OIC application is turned down, the taxpayer’s down payment is not refunded. Under H.R. 2343, taxpayers would not be required to submit a partial payment with their applications. The legislation is consistent with the Administration`s FY 2010 revenue proposal to eliminate the partial pay requirement.
The need to increase the usage of OIC agreements in situations of economic hardship was raised at a February hearing of the Ways and Means Subcommittee on Oversight examining IRS assistance to taxpayers during the economic downturn. At the hearing, National Taxpayer Advocate Nina E. Olson testified that the number of OICs received by the IRS fell by 21 percent from Fiscal Year 2006 to Fiscal Year 2007 as the down payment requirement took effect. Ms. Olson testified that the 21 percent decline is partly attributable to the difficulty taxpayers face in obtaining funds to make the 20 percent down payment prior to the acceptance of an offer. She also noted that less than one in four offers is actually accepted. As a result, federal taxes that could be collected are left unpaid.
