How to File an Offer-in-Compromise with Periodic Payments
An offer-in-compromise (OIC) is an “offer” to the IRS to settle your tax debt for less than you owe. One option for the offer-in-compromise is called Doubt as to Collectibility. With this type of offer, you will need to make the case that you cannot pay the entire amount owed. When you prepare an offer, you can offer to pay a “lump sum,” or you can offer to make periodic payments. The acceptance criteria for each type of offer is different, and how you make the payments for each is also different. If you select to apply for a “Lump Sum” Offer, you agree to pay the offered amount within five months of the date of acceptance. Click here to read a previous blog post on How to File a Lump Sum Offer.
A short-term deferred offer, also known as a “Periodic Payment Offer,” is one in which
the taxpayer will begin making monthly payments while the Offer is pending and will pay
the Offer's balance in more than 6 months but not more than 24 months. It
operates the same as a lump sum Offer, except that the taxpayer must begin
making monthly payments and continue making his or her monthly payments. In contrast, the
Offer is being considered, just like an installment agreement. The other difference
between Short-Term Deferred Offers and Lump Sum Offers is the IRS will calculate the
Reasonable Collection Potential (RCP) based on 24 months of future income instead of 12 months.
Your offer amount will be based on your calculated Reasonable Collection Potential (RCP). Two components will be used to calculate your RCP.
● Net Equity in Assets
● 24 months of Future Income
A good Tax Debt Resolution Specialist can help you determine if you are a good candidate to submit an offer-in-compromise (OIC) and which type of OIC is best for you. We suggest your search for a tax professional with the appropriate training and experience in filing Offers-in-Compromise.
When filing the short-term deferred offer, the taxpayer sends in two checks that accompany the Offer (with Form 656 - the offer application form):
● One check for $205 for the Offer application fee (the fee as of Apr 27, 2020)
● One check for the first monthly proposed payment. Your tax professional will help you determine an amount that is likely to be accepted by the IRS.
With a short-term deferred offer, you must continue making the monthly payments while the IRS processes/reviews your offer. This process could take 12-18 months.
While your offer is being evaluated:
● A Notice of Federal Tax Lien may be filed;
● Other collection activities are suspended;
● The legal assessment and collection period is extended;
● You are not required to make payments on an existing installment agreement; and
● Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If your offer is rejected, you may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711.
At Tax Debt Resolution Services of Winchester VA, our mission is to help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester VA, Strasburg VA, Martinsburg WV, and Charles Town WV to resolve their tax debts! If you need assistance, please feel free to contact me at 540-662-4432 or firstname.lastname@example.org.