The IRS Offer in Compromise (OIC) program allows for either a lump-sum payment or periodic payment option. However, the lump sum option actually allows for a limited amount of periodic payments as well.
Lump Sum vs. Periodic Payment Offers
You must submit 20% of your lump sum offer with your OIC application, and these payments generally aren’t returned if your offer is rejected. You can then pay the remaining balance of your offer in five or fewer payments that take place within five or fewer months from when your OIC is accepted. The 20% down payment isn’t required if you meet the Low-Income Certification standards.
The periodic payment option allows you to pay your full balance within six to 24 months. You must submit your first month’s payment with your OIC application unless your qualify for Low-Income Certification.
One drawback of the periodic payment option is that you must continue to make monthly payments while your offer is being considered by the IRS, which can take several months or more. If you don’t make these payments, your offer will be returned, and the IRS will keep any payments you’ve already submitted.
You also have the option to submit more than the required initial payment and designate it as a deposit. You can request to have your deposit returned to you if your offer is rejected by checking the appropriate box on your OIC application.
At most, you have 24 months to pay the full amount of your Offer, and a failure to make your required payments can cause your OIC to be defaulted, which will once again make you responsible for paying the full balance of your tax debt.
Partial Payment Installment Agreements
An alternative to a periodic OIC is a partial payment installment agreement (PPIA). You may be able to get a PPIA more easily than an OIC. However, the IRS will still want to analyze all of your financial information before accepting a PPIA because it will result in partial forgiveness of your tax debt.
PPIAs are straightforward—you make monthly payments until the collections statute for your tax debt expires. At that point, your remaining tax debt is forgiven.
Getting the IRS to accept a PPIA request is a little more complicated. If you have any assets that can be sold or borrowed against, the IRS may ask you to do so before accepting a PPIA.
A tax relief attorney can explain the pros and cons of each of these options and determine which one is the right choice for your situation.
Contact The Gartzman Law Firm to speak with an Atlanta tax resolution attorney about your case. Request your consultation by calling (770) 939-7710.