Offer in Compromise vs. Installment Agreements: Which Is Right for You?

If you owe the IRS more than you can afford to pay, you’re not alone. Many Seattle taxpayers face overwhelming tax debt from unexpected financial setbacks, business struggles, or past filing mistakes. The good news is that the IRS offers programs to help taxpayers resolve their debt. Two of the most common options are the Offer in Compromise (OIC) and the Installment Agreement.

 

But which option is right for you? Let’s break down how these IRS debt relief programs work, the pros and cons of each, and when to consider them.

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What Is an Offer in Compromise?

 

An Offer in Compromise allows you to settle your IRS debt for less than the full amount you owe. If accepted, you make a lump sum or short-term payment plan, and the rest of your tax debt is forgiven.

 

Who qualifies?

• Taxpayers who cannot pay their full liability without severe financial hardship

• Those with limited income, assets, or ability to pay

• People who can demonstrate to the IRS that paying in full would be unfair or impossible

Pros of an Offer in Compromise:

• Potentially pay far less than the total owed

• Get a fresh financial start once completed

• Stops aggressive IRS collection actions while your application is under review

Cons of an Offer in Compromise:

• Strict eligibility requirements – the IRS accepts fewer than half of all OIC applications

• Requires extensive financial disclosure and documentation

• Takes several months to over a year for the IRS to decide

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What Is an Installment Agreement?

 

An Installment Agreement is a payment plan with the IRS that allows you to pay your debt in manageable monthly payments over time.

 

Who qualifies?

• Taxpayers who can’t pay their debt all at once but can manage monthly payments

• Individuals or businesses with steady income who want to avoid aggressive collection actions

Pros of a Streamlined Installment Agreement:

• Easier to qualify for than an OIC

• Flexible payment options, including long-term plans

• Stops IRS collection activity once approved

Cons of a Streamlined Installment Agreement:

• You must pay the full balance over time (plus interest and penalties)

• Monthly payments can be a financial strain if your income is limited

• If you default on payments, the IRS can reinstate collections

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Offer in Compromise vs. Installment Agreement: Key Differences

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Which Option Is Right for You?

• Choose an Offer in Compromise if you have limited income or assets, and there’s no realistic way you can ever pay the full amount. This is ideal if paying in full would create financial hardship.
• Choose an Installment Agreement if you can afford to make steady monthly payments and want to avoid further IRS enforcement actions.

Every tax situation is different, and choosing the wrong option can cost you thousands of dollars or result in a rejected application.

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Work With a Seattle IRS Tax Attorney

 

The IRS does not make debt relief easy. Applications for Offers in Compromise are often denied, and Installment Agreements require careful negotiation to secure the lowest possible monthly payment.

 

At Robert V. Boeshaar, Attorney at Law, LL.M., PLLC, we help Seattle-area taxpayers resolve IRS debt through Offers in Compromise, Installment Agreements, and other relief programs. Our goal is to protect you from IRS collections and find the solution that fits your financial situation.

 

We love saving people money! Contact our office today to schedule a consultation and take the first step toward resolving your IRS debt.