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What are my options for paying back tax debt? P.2

On Behalf of | Oct 13, 2016 | Back Taxes Or Tax Debt |

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.

As a periodic payment, an offer in compromise must include the initial payment with the application and then monthly payments until the offer is either rejected or accepted and paid in full. Taxpayers who meet certain income guidelines are not required to pay an application fee or to make an initial payment, and don’t need to make monthly payments while the offer is being considered.

Working with an experienced advocate in the application process can help a taxpayer determine the best repayment option and to make the strongest possible case for meeting the specific requirements of the repayment option sought.

Another important aspect of paying back tax debts is handling tax liens, which are the government’s legal claim against a taxpayer’s property when a taxpayer defaults on tax debt. Taxpayers are able to request that the IRS withdraw a Notice of Federal Tax Lien when certain requirements are met and they pay off their debt, and it can be helpful for a taxpayer to work with an experienced attorney in the process to ensure his or her rights are protected.

We’ll take a look at this topic in our next post.


IRS, Payment Plans, Installment Agreements, Accessed Oct. 12, 2016.

IRS, Offer in Compromise, Accessed Oct. 12, 2016.  

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