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

getting a rejection letter from the Internal Revenue Service on an Offer in compromise application may possibly give you with a little stress and panic, however don’t agonize — you could still pursue the choice of paying your full balance in payment installments.

The Internal Revenue Service permits several installment agreement payment options such as full-payment installment plans or partial-payment installment plans . Full-pay plans could be the promised installment agreement, the streamlined installment agreement, and the financially verified installment agreement. The payment plan you are eligible for is based on financial facts you supply to the Internal Revenue Service, but each monthly payment installments for the different courses are assessed a little differently than OIC settlement amounts.

In this conversation we’ll go over these repayment plans and guide you figure out which option of settlement is most advantageous for you.

The Guaranteed Installment Agreeement Option

The guaranteed installment agreement option is available only if your balance due is less than $10,000 and payments will pay in full your full Internal Revenue Service owed debt inside a period of 3 years or 36 months. The Irs has to agree to this plan if you meet their requirements.

The Streamlined Installment Agreement

The streamlined installment agreement is available if your balance due is equal to or under $25,000 and you consent to pay in full your full IRS balance within 5 years or 60 months. The full balance considers your principal tax liability, plus penalty accruals and interest for each tax year you have a balance.

Calculating Your Monthly Payment Installments

To figure out the lowest possible amount the Irs will permit each month, divide the full amount owed, including interest and penalties, by fifty. The resulting number is the base amount you must pay. 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 warrant a 60-month payment plan, you just might meet the criteria for a partial pay plan in lieu.

Installment Agreement Partial Payment Plans

A partial payment installment agreement plan is a repayment plan that will allow you to make payments of only what you can manage to pay on a month by month basis, even if the amount is under what the Irs usually consents to on an installment agreement. You must make payments for the remainder of the period the Internal Revenue Service can legally collect your debt, this may be longer than 60 months or 5 years. And when the collection statute of limitations expires, any balance which remains is essentially written off by the Internal Revenue Service. The plan is called a partial pay installment agreement because you will never wholly pay the debt that 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.

Calculating Payments

The partial payment installment agreement is based on your disposable income on a monthly basis, this is the amount of money you have left each month after your expenses are paid. Determine your monthly disposable income by the number of months remaining on your collection statute to figure the full amount you are going to need to pay the Irs over time. That is, if your disposable income is $100 and the duration of time remaining on the collection statute is 24 months, you will have to pay $2,400 total towards your tax liability. The remainder is uncollectable by the Internal Revenue Service. Though, you have to make the payments in set installments and you can’t offer the total amount in a lump sum payment.

Non-Streamlined Installment Agreements or Financially Verified Installment Agreement

The financially verified or “Non-Streamlined” installment agreement is attainable when your balance due is over $25,000 or when the repayment period exceeds 5 years or 60 months. This agreement must be negotiated with the Irs. Complete financial disclosures are to be provided to the Internal Revenue Service. Your monthly payment amount is arrived at by reviewing your complete financial situation, and the Internal Revenue Service could potentially require you liquidate assets so as to reduce the balance due.

The Rules that Apply to the Installment Agreement Plans

No matter the type of repayment , a few general rules are applicable for retaining and obtaining your installment agreement contract.

Oic Rejection Period

In many cases, you must wait at the least a period of sixty days post the date stamped on your Offer in compromise rejection letter for you to request an installment agreement option. During this 60-day period, your file is coded as an “Offer” case in the Irs system to permit for your sanctioned right to repeal the OIC rejection. Irs agents are not able to pull your case out of this status to mark it as an installment agreement.

Staying Current and Compliant

Once you are bound to an installment contract, you have to remain current and compliant with the payment calendar and forthcoming tax commitments. This means if you’re on this contract, then you have to meet all installment payments on time and in full, file all future tax returns according to the schedule, and pay all new balances in full and on time.

Failure to comply with these stipulations will cause your payment plan to default and open you up to additional IRS collection measures.

Change in Financial Circumstance

If your financial circumstances change and this change stops you from meeting the scheduled payments. Inquire about a change to your monthly installment payment.

If this change to your finances is anticipated to endure over a months period, you can proceed. Examples of qualifying financial changes are: divorce, a reduction in income, a loss of income, the addition of a dependent, or an increase in regular living expenses. The Internal Revenue Service requires documented proof of this change in your financial statements.

Your full-pay installment agreement could be converted to a partial payment plan, if the change in income qualifies this change in payment plan. Installment agreements are generally much more simple to arrange with the Internal Revenue Service and require less paperwork than an OIC application procedure. An installment agreement plan is a solution to an Offer In Compromise rejection.

Head to the guide to offer in compromise at Accountants and Tax Preparers in Bellevue