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 48 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 60 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.
3. Deferred Payments over the remaining statutory period for collecting the tax - in which the amount offered will be paid in monthly installments upon written notice of acceptance over the remaining statutory period for collecting the tax.
The 10 year statutory collection period starts to run from the year an individual tax liability is assessed upon the filing of a tax return. In order to have an offer accepted under this option, the taxpayer must basically include the liquidation value of their assets plus the amount the IRS believes it could collect through monthly installments during the remaining life of the collection statute.
The advantage of making an offer to be paid in installments over the remaining statutory period for collecting the tax is that the twenty percent non-refundable deposit required under lump sum cash method described above is notrequired under this method.
The disadvantage to this method is that the Taxpayer's RCP is usually at it's highest under this method. Under the deferred payments over the remaining statutory period for collecting the tax 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 as many as 120 monthly installments (or over the remainder of the statutory period for collection, whichever is less).
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