In addition to the $186 application fee, Taxpayers are required to make nonrefundable partial payments with the submission of either of the two payment option forms of OIC’s. Taxpayers who submit a lump-sum cash offer in compromise must include a payment of 20 percent of the amount offered. For the purposes of the partial payment requirement, a lump-sum offer is any offer that will be paid in five or fewer installments.
Taxpayers who submit a periodic payment offer must include payment of the first proposed installment with the offer and continue making payments under the terms proposed while the offer is being evaluated. This option requires the first payment with the offer and the remaining balance paid within 6 to 24 months, in accordance with the proposed offer terms. Taxpayers who submit a periodic payment offer should use Form 656-PPV, Offer in Compromise Periodic Payment Voucher, to remit required periodic payments to the IRS while an OIC is under investigation.
The required partial payments are applied to the taxpayer’s unpaid liability and are not refundable. However, taxpayers may specify the liability to which they want their payments applied. The specification must be made in writing when the offer is submitted or when the payment is made and it cannot be changed later.
A periodic payment offer may be deemed to be withdrawn if the taxpayer fails to make a payment due under the terms proposed while the offer is pending required partial payment.