The Offer in Compromise is the white whale of tax debt resolution. It allows you settle your debts with the IRS for less than what you owe. So naturally, there are quite a few factors that are considered before they will allow it.

They even tell you right on the IRS website “ Explore all other payment options before submitting an offer in compromise.”Just to apply, you have to send 4 things (you or your tax lawyer). I’ll include the Offer in Compromise guide here if you want more information.

1. $186 application fee. Non-refundable fee.

2. The Initial Payment for each form 656 (Offer In Compromise tax form) The form itself states that is only to be used by tax professionals (like a tax lawyer) and not individuals.

3.Form 433-A (Collection Information Statement for wage earners and Self-employed individuals)

4. Form 656 (Offer In Compromise)

If you qualify for the low income certification, you won’t need to send the fee or initial payment. Nor will you be required to make monthly payments while your offer is being considered.

Your Initial payment will be based off what you owe and the payment type you choose.

Lump Sum: Initial payment is 20% of total debt and the rest is to be paid in 5 or less installments. You would be required to state on the form (656) during what month you would pay each payment. You don’t have to pay the same amount every time. And you don’t have to pay every single month. The only stipulation is the initial payment and that there are 5 or fewer payments.

Periodic Payments: You are allowed to choose your payments as long as that payment is enough to pay off the full amount between 6 and 24 months. So if your debt is $24,000, you can choose to pay $4,000 every month on the same day of the month. Or you can choose to pay $1000 every month on the same day.

And just so you know, whatever you send as an initial payment is applied to your tax debt, even if you get rejected for the OIC.

Additionally, the IRS may still file a lien against your property while you are being considered for the OIC (offer in compromise), but if you are accepted, they will release the lien within 30 days of having the payment terms satisfied.