1. Lump Sum Cash Offer – in which the amount offered will be paid in five or fewer installments upon written notice of acceptance.
The advantage of making a Lump Sum Cash Offer is that the Taxpayer’s RCP is usually at it’s lowest under this method. Under the Lump Sum method the Taxpayer’s RCP is basically calculated as the liquidation value of the taxpayer’s assets plus the total amount the IRS believes it could collect through 12 monthly installments (or the remainder of the statutory period for collection, whichever is less).
NOTE: Generally the collection statute is 10 years from the date that your liability was assessed. If you need assistance in calculating the remaining time on your collections statute, call 1-800-829-1040.
The disadvantage to this method is that twenty percent of the total amount of the offer must be paid as a non-refundable deposit at the time of the submission of the Form 656 and this amount will not be refunded should the offer be rejected.
2. Short-term deferred payments for up to 24 months – in which the amount offered will be paid in more than five but fewer than 24 monthly installments upon written notice of acceptance.
The advantage of making a short-term deferred offer is that the Taxpayer’s RCP is usually at it’s next to lowest under this method. Under the short term deferred method the Taxpayer’s RCP is basically calculated as the liquidation value of the taxpayer’s assets plus the total amount the IRS believes it could collect through 24 monthly installments (or the remainder of the statutory period for collection, whichever is less). The monthly installments called for under the plan must be paid and continued under the terms proposed while the offer is being evaluated. These payments are non-refundable should the offer be rejected. However, the twenty percent non-refundable deposit required under the lump sum cash offer method described above is not required under this method.
