You can choose to pay off your Offer in Compromise Settlement in one of three payment options:
- Lump Sum Cash Offer: This requires a payment of 20% of the offer along with the $150.00 application fee. The Offer must be paid in five payments or less.
- Short Term Periodic Payment Offer: The Offer amount must be paid within 24 months of the date the IRS receives the Offer. The first payment is due when you file Form 656, and regular payments are required while the IRS investigates your case.
- Deferred Periodic Payment Offer: The Offer must be paid over the remaining statutory period on the Tax Debt. The first payment must be submitted with Form 656 and regular payments must be made while the IRS investigates your case.
This type of filing can be very difficult to get approved if you do not fully understand it. The payment installments you make to the IRS are nonrefundable so make sure you have everything filled out correctly. You don’t want to lose a significant amount of money getting your offer approved if you don’t qualify, so be sure to fill every blank on Form 656. Also you need to provide as much supporting documentation as possible. The IRS intentionally makes this filing difficult, which is why it is highly suggested to consult with a tax professional before submitting for an offer in compromise.