The 3 Offer in Compromise Payment Options You Must Understand
An Offer in Compromise represents the most popular type of IRS tax settlement. Make a decision concerning the terms of the settlement payment or payments and complete the IRS Tax form 656.
There are 3 Payment options provided by IRS.
1. OIC Option 1- Lump Sum Cash Offer - A Lump Sum Cash offer requires that the accepted offer amount be paid in 5 or fewer installments. The amount should be paid within 5 months of the date the offer is accepted. A 20% down payment is also required.
2. OIC Option 2 - Short Term Periodic Payment Offer – you should make the first payment when the offer is submitted. You need to pay the whole amount within 24 months from the date the Internal Revenue Service receives the tax settlement application.
3. OIC Option 3 - Deferred Periodic Payment Offer – you are allowed to pay the offer amount over the remaining statute of limitations on collection. Submit the first payment when the offer is submitted and make the monthly payments while their tax settlement is being considered.
A Lump Sum Cash Offer allows you paying a smaller amount for a tax settlement. If you know you are able to pay the full offer amount within 5 months, choose this option.
Do not hesitate to hire a tax professional that will significantly relieve the process of preparing and submitting the Offer in Compromise.
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