What’s the difference between an Installment Agreement and an Offer in Compromise?
Good question. Both are very different programs for very different circumstances. But first, let’s talk about the general.
If you’re considering either the Offer in Compromise program or the Installment Agreement, you clearly are in over your head in tax debt. It’s a tough place to be, for sure. For that reason, the first thing you should do is consult a qualified tax professional. He or she will analyze your previous return to the penny to make sure you aren’t offering to pay the IRS anymore than you owe. Oftentimes, this process alone will significantly lower your tax debt.
Once you know exactly how much you owe, you’ll need to ask yourself a question: “Is this debt something I can pay off over time or is the amount so considerable that no matter how much time I have I will not be able to pay it off?”
If you believe you can settle the debt over time, you should consider the Installment Agreement. With this program, the IRS allows you to pay your debt in small installments that allow you to chip away at your tax arrears without leaving you so broke you can’t enjoy life. You can think of it like a car payment — a significant but manageable monthly bill that you must account for and which, in the end, will satisfy for your debt.
On the other hand, if you know you can’t pay off your debt over time — and you will have to prove this to the IRS — the Offer in Compromise could be for you. This allows you to make a settlement offer to the IRS which will eliminate your tax debt once and for all. Believe it or not, this settlement amounts to pennies on the dollar compared to your tax debt.
More Tax Help, IRS News and Tax Relief Tips:
- If I am not eligible for the Offer in Compromise program, can I enroll an Installment Agreement?
- Since the New Year has rolled around, I’ve made myself a promise: I want to get rid of my tax debt. I owe about $140,000 in back taxes and now earn about $65,000 per year (with no savings). I don’t know where to begin. Can you help?
- For reasons that aren’t worth describing here, I’m in trouble. Whereas I once made six figures, I now make a roughly average income. Worst still, I owe a lot of money in back taxes – taxes owed for when I was making good money. In all, I owe about $127,000, according to an accountant. I don’t have that kind of money! What can I do?
- Ask the Tax Resolution Expert - Do I Qualify for the IRS Offer in Compromise Plan or Participating in the IRS Installment Agreement Payment Plan?
- Ask the Tax Resolution Expert: The IRS Offer in Compromise or Installment Agreement Programs May Be Your Tax Debt Solution
Tags: Installment Agreement, Offer in Compromise
