Offer and Compromise FAQ by Clients
Do I Qualify? If you can answer yes or N/A to the following questions:
- Are you currently in an open bankruptcy proceeding?
- Have you filed all required federal tax returns?
- Have you made all required estimated tax payments?
- If you are self-employed and have employees, have you submitted all required federal tax deposits?
What is the IRS fee?
What does the IRS evaluate to come up with what it considers an acceptable offer?
The IRS will look at your ability to pay, income, expenses and asset equity.
What are the payment terms?
Lump sum: 20% at time of offer and paid in full in 5 or fewer installments
Short Term Periodic Payments: Initial payment at time of offer, continuing payments while IRS considers your offer if accepted pay monthly until paid in full.
Deferred Periodic Payment Offer: (1) payment of net realizable equity (NRE) in 90 days from time of offer, payment of future income amount by monthly installments over the time remaining on the statutory period for collection; (2) payment of a portion of the NRE in assets within 90 days from time of offer and payment of the balance of the equity in assets and the future income amount by monthly installments over the time remaining on the statutory period for collection; and (3) Payment of the entire compromise amount by monthly installments over the time remaining on the statutory period for collection.
What must I pay?
The cash equivalent of what the IRS could collect by levy or other seizure of your income and assets within a reasonable period of time. Reasonable period of time depends on your offer. For the Lump Sum Offer reasonable period of time is 12 months; 24 months for Short Term Periodic Payments, and number of months left in the 10-year statute of limitations for collection for Deferred Period Payment Offer.
What happens while my offer is being evaluated?
Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
- A Notice of Federal Tax Lien may be filed;
- Other collection activities are suspended;
- The legal assessment and collection period is extended;
- Make all required payments associated with your offer;
- You are not required to make payments on an existing installment agreement; and
- Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
What happens if my offer is accepted?
- You must meet all the terms of your offer, including filing all required tax returns and making all payments.
- Any refunds due within the calendar year your offer is accepted will be applied to your tax debt.
- Federal tax liens are not released until your offer terms are satisfied.
What happens if my offer is rejected?
You may appeal if you do so within 30 days of rejection.