The passage of H.R. 3, the Safe, Accountable, Flexible and Efficient Transportation Act of 2005, will effectively destroy the Internal Revenue Service's offer-in-compromise program, according to the American Association of Attorney-CPAs.
An obscure provision in the act will require partial payments of 20 percent with the submission of offers. Although Congress scores this as a revenue raiser, the proposal will lead to fewer offers being submitted, and, for offers that are submitted, lead to lower amounts being submitted, said E. Martin Davidoff, chairman of the association's IRS Tax Liaison Committee.
In a letter to the chairmen and minority leaders of the House Committee on Transportation and Infrastructure and the Senate Environment and Public Works Committee, Davidoff and Bernard Eizen, president of the AAA-CPA, noted that the provision would also increase the cost of collecting dollars from people no longer pursuing offers in compromise, and would reduce overall revenue collections.
"Fewer offers will be submitted as attorneys, CPAs and other tax practitioners fear that submitting funds to the IRS at the outset of an offer will provide the IRS with even less incentive to accept offers," the letter stated.
Moreover, Davidoff pointed out, tax practitioners fear that their recommendation to submit any substantial offers in compromise might create a liability for them as practitioners. "How could we reasonably submit an offer with a 20 percent deposit when there is a five in six chance that the offer will be returned or rejected and the funds retained by the IRS?" he asked.
The bill has already passed the Senate and House, and is currently awaiting action in conference.
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