Taxpayers that qualify may take advantage of the federal “Offer in Compromise” program to resolve and settle their tax problems. The Offer in Compromise (“OIC”) program is not for every taxpayer and the IRS advises that taxpayers explore all other payment options before applying for an OIC. An experienced tax professional is absolutely essential in all steps of the process of formulating, making, and awaiting the IRS to accept, an OIC.
A taxpayer’s initial payment will vary based upon the offer and the payment option of his or her choice. There are two payment options: The first involves lump-sum payments with an initial payment of 20 percent of the total offer amount submitted with the application. The taxpayer then pays the remaining balance of the offer in five or fewer installments within five or fewer months after the offer is accepted.
The second payment option in an OIC involves periodic payments, either short-term or deferred. An initial payment is also submitted with the OIC application and then the remaining balance is paid in monthly installments. Usually, the IRS requires that taxpayers make periodic payments and pay off all of the debt in six or more monthly installments within twenty-four (24) months.
Those taxpayers that have their OIC applications accepted must timely file and pay their taxes for at least five years following the acceptance of the OIC. Thus, taxpayers taking advantage of the federal “Offer in Compromise” program should realize that generally they only have five to twenty-four months to comply with the terms of their offer and pay it in full.
If you cannot pay your income tax liability, or doing so creates a financial hardship, consult with an experienced and knowledgeable tax attorney to determine if you qualify for an Offer in Compromise. Contact the tax experts at Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
