IRS Offer In Compromise Agreement Payment Options
There are two main payment options available with an IRS Offer In Compromise (OIC). When you fill out form 656, you select one of two payment methods with your offer as well as the $186 application fee (unless you meet low-income certification).
1. Lump Sum Cash Offer
Lump-sum offers are paid in five payments or less. You must submit all payments within five or fewer months after the offer is accepted. When you submit your application, you need to include 20% of your offer plus the application fee.
2. Periodic Payments
This is when you pay in monthly payments with a term shorter than 24 months but longer than five months. When you apply, you should send your first monthly payment and the application fee. While you wait for the IRS to respond, make the monthly payments as suggested by your offer. Then, if the IRS accepts your offer, continue making the payments until you’ve paid the whole offer amount. If you fail to make payments, the IRS will reject your offer and provide you no appeal rights.
Additional Information About OIC Payments
When you send in your offer in compromise application, attach two checks made out to the United States Treasury. One check is for the initial payment, and the other is for the application fee.
The payments you send with your application are nonrefundable. Therefore, if the IRS does not approve your OIC, then the IRS subtracts any payments made from your total balance. However, if money is tight, you do not want to “waste” those payments. To be on the safe side, make sure you fill out everything correctly and provide as much information as possible.
It is always a good idea to send your payments, the IRS forms, and related financial documents via Certified Mail. This way, you know when the IRS received it.
You can find a great checklist here that the IRS provides regarding your offer in compromise.
It’s hard to get an approval for an Offer in Compromise. The IRS intentionally makes the process difficult. If you are considering applying for an Offer in Compromise with the IRS, get a free consultation by calling the phone number above.
Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.