Offer in Compromise - The Deferred Periodic Payment

In most circumstances, the Deferred Periodic Payment Offer in Compromise is the most expensive and, therefore, worst option for a taxpayer. Net monthly income is calculated as far as the Statute of Limitations on the most recently accrued tax liability extends, which can mean calculating up to ten years of collection potential (this time period may be extended by certain circumstances, such as by the individual filing for bankruptcy). It should also be noted that if the total liability will be paid off before the Statute of Limitations expires, then the payments would cease at that point.

To contrast to the other types of payment options, let us say that a taxpayer has $50 net monthly income. For a Cash offer, that figure would be multiplied over a period of 48 months, coming to $2,400 of collection potential. For a Short Term Periodic Payment Offer in Compromise, it would be multiplied across 60 months, totaling $3,000. But, if the tax liability would not be paid off before the expiration of the statute of limitations, the $50 per month would be multiplied, in many cases, over the subsequent nine years, totaling $5,400.

Individuals considering the Deferred Periodic Payment option would be advised to also consider an installation agreement. That said, all financial situations are different, and the taxpayer is advised to either research his/her options thoroughly before deciding on a course of action. For example, if tax debt were accrued years previous to the Offer, and the Statute of Limitations had not been extended, it could conceivably benefit the taxpayer to opt for this payment method.