Offer in Compromise - dealing with initial payment - question about nuances

[bhuether]

Hi,

I have just about finished an OIC.  I plan on submitting as a low income tax payer. 

In the OIC form 656, there are several nuanced points and I can't figure out how to proceed:

1. One can choose 5 lump sums, or monthly payments over, say, 24 months.  If making a lump sum, you are expected to include 20% of your offer.  In my case, I have money from selling my car specifically for purposes of paying down my tax debt and as an OIC initial payment, but thereafter I will have low cash flow. On the form it says

---

The first monthly payment of $___ is included with this offer then $____ will be received on the ___
day of each month thereafter for ___ months with a final payment of $____ to be paid on the ____ day of the

___ month.

---

Then it says

---

Enclose a check for the first month's payment (waived if you met the requirements for the Low-Income Certification).

---

In my case, even though I am requesting to be viewed as low income tax payer, I would propose making the first payment large.

Now, where they say "a check for the first month's payment", could I just show them an electronic payment verification that I make today, and ask them to consider that the first payment? That way when they actually get my OIC and review it, they see my prior payment and understand to apply it as the first OIC payment?

I want to make that initial large payment now as show of good faith, and to reduce my debt sooner (and therefore penalties)., but really need it to be considered as my initial payment...

Anyway, hoping someone can shed some light.

Maybe it just comes down to my explanatory notes and a dialogue with the IRS and then they will ensure treatment of my initial electronic payment as I intend?

thanks!

[AmyC]

The majority of OICs are rejected the first time so you may need to apply again. Plan your finances with that in mind. Your offer must accompany the paperwork, it cannot be filed separately. You may want to do the lower payment now, once accepted, send the lump sum to pay it down and reduce penalties and interest.

See:

• Offer in Compromise Pre-Qualifier
• Offer in Compromise FAQs
• Form 656-B, Offer in Compromise Booklet
• Appeal your rejected offer

[bhuether]

In the IRS's instructions, they mention allowing an included deposit to be applied to the tax debt if the offer is not accepted. 

But at same time for low income tax payers they specifically instruct you to not include first payment. So when you write "Your offer must accompany the paperwork, it cannot be filed separately" maybe you mean in the case of not requesting the IRS to handle you as low income tax payer?

So in my case,  I want to "include" a deposit in some sense, but instead just pay up front by EFT.  In the IRS's eyes it should be equivalent to checking off the 2nd box on the offer that says "If your offer is rejected, returned, or withdrawn please check one of the boxes below and let us know what you would like us to do with your deposit. Return it to you ( Initial here ) Apply it to your tax debt  ( Initial here )"

In the end the bookkeeping should be identical, since if they accept, they see my EFT verification and can check off in their books paid, and if they don't accept, I would have effectively already given them the green light to "Apply it to your tax debt" (as it would already be applied at that point) with added bonus to me as the taxpayer of getting that payment credited up front and reducing my debt. 

In a way similar to sending first payment with tax return. I mailed return yesterday but didn't send check. I made payment online and sent them my payment verification.  Just thinking out loud.

Anyway, on hold with IRS now, will see what they say... though already on hold for an hour!

thanks

[bhuether]

Looking at section 5 of the form 656, I see this:

---

Electronic Federal Tax Payment System (EFTPS)

List offer payments made through the Electronic Federal Tax Payment System (EFTPS) below.
Include the 15 digit Electronic Funds Transfer (EFT) Number with each payment.
Offer application fee Date EFT number

Offer payment Date EFT number

Note: Any Offer Application Fee or initial payment made via EFTPS must be made the same date your offer is mailed.

---

So I think this indeed gives me path that I am looking for. On day I mail the OIC I will make the up front large payment via EFTPS despite submitting as low income tax payer.