Offer in Compromise Payment Agreements: What You Need to Know

The idea of an offer in compromise may be appealing, but what if you still struggle to pay off your tax debt or negotiated to offer amount? It’s in the best interest of the IRS to grant you a viable means to pay up, so thankfully, payment plans are available beyond the recommended lump sum approach. These plans can make your tax debt a lot easier to manage, but only if you abide strictly by all terms imposed by the IRS. Below, we explain the basics of OIC payment agreements:

Selecting a Payment Option

When you complete Form 656, you will have the opportunity to choose between a lump sum and periodic payments. Unfortunately, the periodic option doesn’t get you out of paying right away; to qualify, you’ll need to send the first payment alongside your offer. From there, you will continue to make monthly payments for anywhere between 6 and 24 months — even as your OIC is evaluated. If you fail to make payments during this time, your OIC may be returned without the option for an appeal.

Despite its name, the lump sum option can also involve multiple installations. To qualify for a lump sum OIC, you will need to pay 20 percent of your total offer upfront. The remaining balance must be covered in five or fewer payments within the course of five months.

Low-Income Options

The terms outlined above may seem harsh, but thankfully, some semblance of assistance is granted to those dealing with income restrictions. If you qualify for the IRS Low-Income Certification, you need not send an initial payment or make further payments as your OIC is considered.

If you’re stressed about the initial offer and ongoing payments involved in your OIC, you could use a helping hand from the Highland Tax Group. We can help you arrive at a resolution that best addresses your tax situation while keeping you financially afloat. Contact us today to learn more.