Negotiating a Successful Offer in Compromise

Before filing Offers in Compromise, it is important to consider the different payment methods available. Although there are a number of different payment methods for fulfilling an Offer in Compromise, two stand out as the most frequently implemented strategies: the Cash and the Short Term Deferred Offers.

The Lump Sum variety is an Offer of a single payment that covers the full amount of the negotiated liability. The general idea is to take care of the entirety of the debt in one payment. That said, this is often not exactly the case. In addition to the $150 processing fee, 20% of the total Offer is included with the necessary documentation, and the taxpayer may schedule up to five installments to pay off the tax debt.

Short Term Periodic Payment, or Short Term Deferred, Offers in Compromise divide the back taxes into smaller, monthly payments, usually over a two-year period. That means that the total tax debt is divvied up into 24 monthly payments. When sending a Short Term Periodic Payment, the taxpayer must include the first monthly payment in addition to the processing fee, and continue to make the payments, as the Offer schedules them, until the IRS takes action, whether it be acceptance, return, or rejection. Failure to pay will give the IRS the right to return the Offer.

It should be noted that neither of these solutions are better than the other; rather, it depends on the taxpayer’s financial situation. Please make sure to review your circumstances carefully.