Now even if you meet one of the requirements mentioned in part1 of this blog post, your OIC has to be prepared and submitted with a monetary "donation" to the IRS. A taxpayer must pay a $150 application fee along with either a "lump sum offer" or a "periodic payment offer." A lump sum offer will be a nonrefundable payment equal to 20% of the amount you are offering to pay. A periodic payment offer is also nonrefundable and is the first proposed installment payment. While the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer.
Again, easier said than done. There are a lot of people who owe a great amount to the IRS and offer to settle with a lump sum, but in the end, cannot even afford to pay the 20% due at the time they submit their OIC or keep up with their periodic payments during the initial review. With both types of payments being nonrefundable, if the IRS rejects the OIC, the money submitted during that time will simply be applied to the tax liabilities.
If the IRS actually accepts the taxpayer's offer, it is understood that the taxpayer will have no further delinquencies and will fully comply with the tax laws from that point forward. If a taxpayer fails to meet these expectations in the future, the IRS may deem the OIC to be in default and then has the right to no longer accept the agreement and collect the amounts originally owed, plus penalties and interest.
Tax settlement is always a question but hardly ever an answer. Settling with the IRS is an obvious goal for a taxpayer with a hefty liability but may not be a possibility given the specifics of their situation. It is a good idea to be wary anyone who tries to sell a "pennies on the dollar" solution that seems too good to be true....because most likely, that's just what it is.