What are the payment terms for an IRS Offer-In-Compromise?
If you’re filing an Offer-In-Compromise with the IRS, one question you have to ask is:
How long do I have to pay the offer?
This is our Morning Coffee Series, and we’re going to talk about that.
How long can a business pay for an IRS Offer-in-Compromise?
That answer is fairly simple here.
An IRS Offer-In-Compromise has two different payment term options after the offer is accepted by IRS:
- The 5-month option
- The 24-month option
The 5-month option tends to be a lesser minimum offer than the 24-month option, but that 5-month option may require you to make a 20% down payment of the total offer amount.
If IRS chooses to process your offer, well, that 20% down payment is non-refundable, even if ultimately the IRS rejects your offer.
And by rejecting the offer, bottom line to you, that means that IRS does not reach a settlement with you.
Forms of Payment
Whether you choose to pay your offer by borrowing, from your cash flow, or even from retirement savings, that’s up to you and your family. Choose what makes sense for your specific situation.
Payment sources will vary because every business and every family situation is different. An important note here, many people use retirement savings to pay for their offer.
Now, if you do, keep in mind that you may be responsible for tax liability in the current year on the distribution to pay for that offer.
People also pay their offers by borrowing. A popular way is to refinance a loan on an asset that has equity.
A tax lawyer can help you to borrow by having a lien removed to enable you to borrow against that asset.
That’s all for today, but we’ve still got more questions to cover.
And we do that throughout our Morning Coffee Series.