Requesting an Installement Agreement after the IRS Rejects an Offer in compromise

Rejection from the Internal Revenue Service on an OIC application previously submitted may possibly fill you with a little nervousness, however don’t stress — you can still choose the choice of satisfying the payment of the amount owed in payment installments.

The Irs allows for some different installment agreement options such as partial-payment installment plans or full-payment installment plans. Full-pay plans include the streamlined installment agreement, the guaranteed installment agreement, and the financially verified installment agreement. The repayment option you are eligible for is dependent upon fiscal facts you provide to the Internal Revenue Service, but monthly repayments for the different plans are established differently than Offer in compromise settlement amounts.

In this discussion we’ll cover the repayment plan options and assist you identify which option of payment is best suited for you.

Guaranteed Installment Agreeement Option

The guaranteed installment agreement plan is available only if your owed balance is under $10,000 and your installments will pay in full your full Irs balance within a period of three years. The Internal Revenue Service must agree to this option if you conform with the requirements.

The Streamlined Installment Agreement Option

The streamlined installment agreement is is an option of repayment if your balance owed is under $25,000 and you consent to full-pay your full IRS balance in the period of 5 years. This full balance considers your principal tax liability, plus interest and penalty accruals for each tax year you have a balance on.

Determining Your Monthly Payment Installments

To calculate the lowest amount the Internal Revenue Service will accept monthly, divide the full amount owed, including the interest and the penalties, by fifty. The resulting number will show the base amount that must be paid. The remaining 10 months of the 60-month payment plan is set aside for interest. If you do not have sufficient disposable monthly income to grant a 60-month payment plan, you may qualify for a partial pay plan in lieu.

Installment Agreement Partial Payment Plans

A partial pay installment agreement is a plan that makes concessions for you to make payments of only what you can manage on a per month basis, even if the amount is under what the Internal Revenue Service typically consents to on an installment agreement plan. You must make payments for the remainder of the period the Irs can by law collect debt, which might be for a period longer than 60 months or 5 years. And when the collection statute of limitations arrives at its expiration date, any balance which remains is essentially written off by the Internal Revenue Service. The payment option is a partial payment installment agreement because you never will pay the total balance you owe.

Collection Statute of Limitations

You or your power of Attorney may contact the IRS and request the Collection Statue Expiration Date (CSED) for each balance-due period. A statute for collection exists in each tax year you have a tax debt balance. The statute begins when you file your tax return, or upon the date in which a principal tax balance is assessed, whichever is the more recent. The statue will usually end within 10 years, however, there are certain instances when a collection statute can extend passed 10 years.

How to Determine Payments

Your partial pay installment agreement is dependent upon your disposable monthly income, which is the money left each month after your expenses are paid. Figure out your disposable monthly income by the number of months that remain on your collection statute to figure the total dollar amount you are going to pay the Irs over a period of time. For example, if your disposable income is $100 and the amount of time left on your collection statute is 24 months, you will pay $2,400 total toward your tax liability. The remainder is not collectable by the Internal Revenue Service. However, you have to make these payments in set installments so you can’t offer the full amount in a single payment.

Financially Verified Installment Agreement

The non-streamlined or financially verfied agreement is assessible when your due balance is over $25,000 or when the repayment period exceeds 5 years. This agreement needs to be negotiated with the Internal Revenue Service. Complete financial disclosures are to be imparted to the Internal Revenue Service. Your monthly payment amount is based on your complete financial situation, and the Irs could require you liquidate assets in order to reduce the total balance.

Rules Applicable to all Installment Agreement Plan Options

Whatever type of payment plan you request, some basic rules are applied for obtaining and retaining your installment contract.

Offer In Compromise Rejection Period

More often than not, you are going to have to wait at least a period of sixty days post the date marked on your Offer in compromise rejection letter in order to request an installment agreement option. During this sixty-day period, your file is coded as an “Offer” case in the Irs system to allow for your sanctioned right to repeal the Offer in Compromise rejection. Irs officers are not able to change the status of your case to mark it as an installment agreement contract.

Staying Current and Compliant

Once you are on an installment agreement, you must remain up to date and compliant with the established payment arrangements and future tax commitments. This means while you are in this agreement, you will have to make all installment pay dates on time and in full, file all future tax returns on time, and pay any forthcoming balances in full and on time.

If you do not comply with the stipulations, you will default on your payment plan, and therefore be opened up to various IRS Collection Measures

Change in Financial Circumstance

If your financial circumstances change and this change stymies you from keeping your scheduled payments. Ask about a corresponding adjustment to your monthly installment payment.

The change in your financial situation should be considered permanent, or expected to last longer than one month. Examples of acceptable financial changes include loss of income, a reduction in income, divorce, the addition of a dependent or an increase in regular living expenses. The IRS will request an updated financial statement and proof of new expenses to process the modification request.

Modifications may result in your full-pay installment agreement being translated to a partial payment plan. Installment agreements are in most cases less effortless to establish with the Internal Revenue Service and incur less paperwork than an Offer In Compromise process. An installment agreement option provides a an alternative to an Offer In Compromise rejection.

Check-out the guide to offer in compromise at Tax Preparers and Quickbooks Pros