What is the difference between a lump sum and periodic payment Offer in Compromise?

The IRS offers two payment options for Offers in Compromise. A lump sum offer requires a 20% non-refundable deposit with your application (Form 656) and the remaining balance within 5 months of acceptance. This option results in a lower total settlement because the IRS only counts 12 months of future income in the RCP calculation. A periodic payment offer requires the first proposed monthly payment with your application and continued monthly payments while the OIC is being evaluated. The total settlement amount is typically higher because the IRS counts 24 months of future income in the RCP calculation. Which to choose depends on your situation: if you have access to a lump sum (from a loan, family, or savings), the lump sum offer usually results in paying 30-50% less than a periodic payment offer. If you don't have lump sum access, the periodic payment option lets you settle over 6-24 months after acceptance. Note: the initial payment (20% for lump sum, first monthly for periodic) is applied to your tax debt regardless of whether the OIC is accepted, but is non-refundable if your OIC is returned for not meeting eligibility requirements.