Requesting an Installment Agreement after IRS Rejection of Offer In Compromise (or OIC)

Rejection from the Internal Revenue Service on an Offer in compromise application may lend you with a bit of anxiety and panic, yet do not fear — you’re still eligible the choice of making payments towards the full amount owed in installments.

The Internal Revenue Service grants several installment agreement options for instance a partial-pay installment plan or a full-payment installment plan. Full-payment plans include the streamlined installment agreement, the guaranteed installment agreement, and the financially verified installment agreement. The option you are eligible for is based on fiscal details you lay out to the Irs, but each monthly repayments for each of these plans are established differently than Offer in compromise settlement amounts.

In this article, we’ll examine the repayment plan options and guide you determine which option of payment is appropriate for you.

The Guaranteed Installment Agreement

The guaranteed installment agreement option is available only if your tax debt is below $10,000 and your installments will full-pay your total Internal Revenue Service tax debt in 3 years or 36 months. The Internal Revenue Service is mandated to agree to this purposed plan if you conform with their requirements.

Streamlined Installment Agreement

The streamlined installment agreement is is an option of repaying the IRS if your balance owed is not more than $25,000 and you consent to pay in full your full IRS balance within the period of 5 years or 60 months. The total balance takes into consideration your principal tax liability, plus interest and penalty accruals for each tax year you have a balance on.

Determining The Monthly Payment Installments

To determine the lowest possible amount the Internal Revenue Service will concent to monthly, divide the full amount you owe, including interest and penalties, by fifty. The end result is going to be the minimum amount you must pay. The last 10 months of the 60-month payment plan is set aside for interest. If you do not have sufficient disposable monthly income to allow for a 60-month payment plan, you may meet the criteria for a partial payment plan instead.

The Partial Payment Installment Agreement

A partial payment installment agreement plan is a repayment option that will allow you to pay only what you can afford to pay on a per month basis, even if the amount is below what the Irs usually accepts on an installment agreement plan. You must make payments for the remainder of the period the Irs can legally collect debt, this might be for a period of time extending beyond than five years. And when the collection statute of limitations arrives at its expiration date, any balance that remains is then written off by the Irs. The repayment option is a partial payment installment agreement because you will never pay the full of the balance that you owe.

Collection Statute of Limitations

A collection statute exists for each tax year you have a balance on. The collection statute begins the date your tax return is filed, or on the date a principal tax balance is assessed to your account, whichever transpired most recently. Typically, the statute ends 10 years after it begins, but certain processes can cause the collection statute to be longer than 10 years. Either you, or your Power of Attorney, may contact the IRS and request the Collection Statute Expiration Date (CSED) for each balance-due period.

How to Determine Payments

Your partial payment installment agreement is dependent upon your disposable monthly income, which is the amount of money you have left each month after your expenses are paid. Calculate your disposable monthly income by the number of months that remain on your collection statute in order to figure the total dollar amount you will have to pay the Internal Revenue Service over time. For example, if disposable income is $100 and the amount of time remaining on your collection statute is 24 months, or 2 years, you pay $2,400 toward the tax liability. The rest is uncollectable by the Irs. However, you have to make these payments in set installments and you cannot offer the total amount in a single lump sum payment.

Non-Streamlined Installment Agreements or Financially Verified Installment Agreement

The non-streamlined or financially verfied agreement is assessible if your due balance is over $25,000 or when the repayment period exceeds 5 years or 60 months. 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 determined by your complete financial situation, and the Irs might require you to liquidate assets in order to reduce the debt balance due.

Rules that Apply to all Installment Agreement Plans

Whatever the option of payment plan , some base rules are applied for obtaining and retaining an installment agreement contract.

Offer In Compromise Rejection Period

Most of the time, you will wait at least a period of sixty days post the date of your Offer in compromise rejection letter in order to request an installment agreement. During this 60 day period, your file is marked as an Offer case in the Internal Revenue Service system to permit for your right to appeal the Offer in Compromise rejection. Internal Revenue Service agents are unable to pull your case out of this status to establish an installment agreement contract.

Staying Compliant and Current

When you are locked into an installment agreement, then you must stay compliant and current with the determined payment calendar and forthcoming tax commitments. This means if you’re on the installment contract, you need to meet all installment pay dates on time and in full, file all tax returns according to the schedule, and pay all new tax balances on time and in full.

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

A Change in Financial Circumstance

If your financial circumstances change and this change hinders you from meeting your installment payments. Appeal for a change 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 to your financial statements could warrant a change from a full-payment plan to a partial-pay plan, depending. Installment agreements are typically easier to establish with the Irs and incur less paper work than an Offer In Compromise application procedure. This installment agreement plan provides a an alternative to an Offer In Compromise rejection.

Experience the guide to offer in compromise at Accountants and Tax Preparers in Auburn