Estimated tax payments must be equal to 100 percent of the total tax for the previous tax year or 90 percent of the income tax you expect to owe for the current year. Divide the total by 4 to get your quarterly payment amounts. All estimated tax payments due must be paid before submitting an offer. Flat-rate cash offer: Taxpayers can choose to pay the offer amount in a lump sum or in installment payments.
A lump sum cash offer is defined as an offer payable in 5 or fewer installments within 5 months or less after the offer is accepted. If a taxpayer submits a lump sum cash offer, they must include on Form 656 a non-refundable payment equivalent to 20 percent of the offer amount. This payment is mandatory in addition to the application fee. The 20 percent payment is generally non-refundable, meaning it won't be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without their acceptance.
Instead, the 20 percent payment will apply to the taxpayer's tax liability. The taxpayer has the right to specify the particular tax liability to which the IRS will apply the 20 percent payment. If you qualify for an OCI, the IRS will then determine how much it will accept from you to pay off the debt. The amount of this offer is also called reasonable collection potential (RCP).
This is the amount the IRS can reasonably charge you before the collection law expires. The Offer in Compromise program is a powerful tax relief program designed by the IRS to reduce the tax liability of entrepreneurs or individual taxpayers who fight against them.