Thursday, March 4, 2010
IRS Tax Settlements - The 3 Offer in Compromise Payment Options You Must Understand By Brian Prentice
Posted by sir wil at 7:50 PMAn Offer in Compromise (OIC), the most popular type of IRS tax settlement, allows persons who qualify, to settle for a lesser amount on their back tax liability than what they owe. When completing the IRS Offer in Compromise form 656, a decision will have to be made as to when the settlement payment or payments will be made.
The IRS offers 3 Payment options for this type of tax settlement.
· OIC Payment Option 1- Lump Sum Cash Offer - A Lump Sum Cash offer requires that the accepted offer amount be paid in 5 or fewer installments. The amount must be paid within 5 months of the date the offer is accepted. A 20% down payment is required to be submitted with the offer unless the taxpayer qualifies for the low income exception.
· OIC Payment Option 2 - Short Term Periodic Payment Offer - With this payment option, the first payment must be made when the offer is submitted (unless the taxpayer qualifies for the low income exception). The full amount must be paid within 24 months from the date the tax settlement application is first received by the IRS.
· OIC Payment Option 3 - Deferred Periodic Payment Offer - This payment option allows a taxpayer to pay the offer amount over the remaining statute of limitations on collection. The taxpayer will be required to submit the first payment when the offer is submitted and continue to make the monthly payments while their tax settlement is being considered.
The IRS will allow a smaller amount to be paid for a tax settlement with a Lump Sum Cash Offer, so it is to a person's advantage to chose this option if they have the financial resources to pay the full offer amount within 5 months.
Regardless of which payment option is chosen, a qualified tax professional should be retained to prepare and submit the Offer in Compromise so that you can be sure the lowest possible settlement was made with the IRS.
If you would like more information about the different types of IRS tax settlements as well as a free comprehensive Offer in Compromise report to help you understand the whole OIC process, please visit http://irs-relief.net.
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