Is a partial pay installment agreement better than an offer in compromise?

It really depends on your unique financial circumstances. Some taxpayers qualify for an offer in compromise, while others don’t. Some taxpayers may quickly qualify for a partial pay plan and eliminate more tax debt than with an offer in compromise. Here are some comparisons you will find helpful.

A partial pay agreement is accepted by the IRS in a relatively short period of time. It can take just a matter of months, not years, to get a partial pay deal done. Compare that to an offer in compromise that can take 18 months to get finalized. And once the offer is accepted, conditions must be met for five years after acceptance.

Furthermore, the process to submit a partial pay agreement is less complicated. Your tax attorney creates financial statements and submits them to the IRS. Compare this to an offer in compromise which is a very formal, somewhat complex process.

Once the partial pay agreement is approved, the IRS will review the agreement every two years. You or your tax professional will submit updated financial statements to the IRS. The payments remain the same, increase, or decrease. The partial pay agreement can also be terminated by the IRS or taxpayer.

Example: Let’s say you $75,000 and we determine that the IRS has four years left to collect your tax debt. We negotiate with the IRS and get them to agree to take payments of $180 a month.  By making payments of $180 a month for four years (48 months) you will pay $8,640. At the end of four years the collection statute of limitations runs out on the IRS. You are now tax debt free. You were effectively able to settle $75,000 for $8,640. Once the statute of limitations expires, the IRS will cease collection, you will stop paying the IRS, and the IRS will write off the tax you owe.

Many of our clients have benefited from the Faith Firm free book The Truth about Tax Settlement and Alternative Tax Solutions.

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