Getting an offer in compromise accepted can be hard work, but that’s only part of the story. What happens when your offer is approved? Next, you’ll need to pay up.
Two main options are available for handling your financial obligation: lump sum and periodic payments. While both plans technically involve installments, the periodic payment strategy extends this by including six or more payments, as compared to a maximum of five for the lump sum alternative. Both solutions have their place, as we explain below:
If you’re ready to get your tax drama behind you for good, you could be an excellent candidate for the lump sum approach. Keep in mind, however, that you’ll need sufficient resources to pay off your debt quickly. Otherwise, you risk defaulting on your offer — and this could carry grave consequences. If there is any doubt as to your ability to handle a significant tax bill in short order, take a closer look at periodic payments.
The IRS allows taxpayers with accepted offers in compromise to space payments out over several months. If you choose this option, you may receive up to 24 months to cover your offer. Your first payment is considered month 1, so you’ll technically have up to 23 additional months to handle the remainder of the bill.
Spacing out your payments via a periodic approach can be favorable if you’re worried about defaulting on your offer, but it also means that you’ll be stuck with tax debt for some time. Another consideration: under this approach, you’ll need to keep making payments even as the IRS considers your offer.
Still not sure which type of OIC payment approach is preferable? Look to Highland Tax Group for insight, as well as guidance with the rest of the application process.