In our last post, we began discussing two common repayment options for taxpayers: installment agreements and offers in compromise. Like installment agreements, there are certain requirements that must be met for a taxpayer to qualify for an offer in compromise. As we’ve mentioned, the IRS will look at a taxpayer’s ability to pay the tax gate, his or her income, expenses, and the quality of his or her assets.
An offer in compromise can be paid either by a lump sum or as a periodic payment. If a lump sum, an initial payment of 20 percent of the total offer amount is supposed to be submitted. If the offer is accepted, the taxpayer is then required to pay the rest of the balance off in less than five payments.