Payment Options for an IRS Offer in Compromise Agreement

paying offer in compromiseYou can choose to pay off your OIC settlement in one of three payment options:

  1. Lump Sum Cash Offer: This requires a payment of 20% of the offer along with the $150.00 application fee. The offer must be paid in five payments or less. Recently as of January 2014, the remaining balance must be paid in 5 or fewer payments within five or fewer months of the date the offer is accepted.
  2. Short Term Periodic Payment Offer:The Offer amount must be paid within 24 months of the date the IRS receives the Offer. The first payment is due when you file Form 656, and regular payments are required while the IRS investigates your case.

  3. Deferred Periodic Payment Offer:
    The Offer must be paid over the remaining statutory period on the tax debt. The first payment is must be submitted with Form 656 and regular payments must be made with the IRS investigates the case.

The payment installments you make to the IRS are nonrefundable. You don’t want to lose a significant amount of money getting your offer approved if you don’t qualify, so be sure to fill in every blank on Form 656 and provide as much supporting documentation as possible.

This type of filing can be very difficult to get approved if you do not fully understand it. The IRS intentionally makes this filing difficult, which is why it is highly suggested that you consult with a tax professional before submitting for an Offer in Compromise.