As we discussed over the past few weeks, many of the taxpayers who come into our Richardson, TX, office want to know more about the IRS Offer-In-Compromise program. When you choose to make an Offer to the government, there are two main types of settlement options to choose from. These two options differ in how the offer is calculated and when the payments need to be made. The two options are -
- The Lump Sum Offer, and
- The Deferred Offer
Lump Sum Offer –
- $186 Application Fee (Non-Refundable) plus 20% down when offer is made.
- If offer is rejected, taxpayer loses the down payment.
- The remaining five or fewer payments are made within six months after the OIC is accepted by the government.
- RCP formula is Net Assets + Monthly available Income times 12 months.
Deferred Offer –
- $186 Application fee (Non-Refundable) plus first payment when the application is sent in.
- Payments continue to be made while pending. If rejected, lose those payments.
- Paid in more than 5 but less than 24 monthly payments.
- Do not need to be equal payments. If you need time to sell the asset, you can request a balloon payment at the end.
Which Is Right For Me?
- If your RCP is driven by your monthly available income, the lump sum offer will include only 12 months of income, versus 24, and will result in a smaller offer.
- If your RCP is driven by assets available, the Deferred Offer may give the Taxpayer a longer period of time to pay off the debt.
- One risk is that the taxpayer must stay in compliance. If the Taxpayer gets out of compliance, the OIC is voided. Using the Deferred Offer, give the Taxpayer more time to get out of compliance.
If You Need Help
If you want to learn more about the Offer In Compromise as an resolution alternative to IRS debt and if you qualify, call us at (972) 821-1991 or email bob@jablonskyandassociates.com.
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