Question: I’ve read about the Offer in Compromise and the Installment Agreement. How do I determine which one is right for me?
Answer: This is a great question, and an important one. While I can’t tell you with certainty which is best for you without meeting you in person and discussing your financial situation in detail, I can tell you about each program and these explanations may help you in determining this for yourself.
Let me preface all of this by saying: If you believe you need to use an Offer in Compromise or an Installment Agreement, you should first consult a qualified tax professional who will analyze your previous returns with a fine-toothed comb and help you determine the best path to get back in compliance on your taxes.
To understand each program, it’s important to understand that each is offered for different types of consumers. The Offer in Compromise is intended for taxpayers who owe a substantial amount in taxes but who, for whatever reason, cannot pay their tax debt, even over time. This can be due to employment changes, unexpected financial hardship and medical problems, among other issues.
With the Offer in Compromise, you show the IRS that you do not have the financial means to pay off your tax debt and you then negotiate a payoff amount that can be significantly less than your debt. The Offer in Compromise was born after the IRS realized it could bring in more tax revenue — its ultimate goal, after all — using kinder, gentler tactics than bare-knuckled ones.
By contrast, the Installment Agreement is for taxpayers who cannot pay off their debt in one lump payment but who can pay off that debt over time. Think of this like a mortgage payment or a car loan payment — you pay off a sizeable but not unmanageable amount every month and over time pay off your debt completely.
More Tax Help, IRS News and Tax Relief Tips:
- IRS Question Corner: How Do I Pay Off Back Tax Debt?
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