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

getting a rejection letter from the Irs on an Offer in compromise application understandably could stuff you with some tension and anxiety, nonetheless do not stress — you’ve still got the choice of repaying your balance in payments.

The Irs grants a few installment agreement options including partial-payment installment plans or full-payment installment plans. Full-pay plans could be the financially verified installment agreement, the streamlined installment agreement, and the guaranteed installment agreement. The repayment option you qualify for is based upon financial facts you relay to the Irs, but monthly payment installments for these various programs are assessed differently than OIC settlement amounts.

In this dialogue we’ll go over the payment options and guide you determine which option of repayment is appropriate for you.

The Guaranteed Installment Agreement

The guaranteed installment agreement option is available only if your tax debt is less than $10,000 and your installments will full-pay your total Internal Revenue Service owed balance in 36 months or 3 years. The Internal Revenue Service must concede to this plan if you conform to the requirements.

The Streamlined Installment Agreement Option

This streamlined installment agreement is a means of repayment if your tax debt is equal to or less than $25,000 and you consent to full-pay your entire IRS balance in the period of five years. Your full balance comprises 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 base amount the Irs will permit monthly, divide the full amount owed, including the interests and penalities, by fifty. The end result will be the lowest amount you will have to pay. The left-over 10 months of the 60-month payment plan is set aside for interest. If you have insufficient disposable monthly income to support a 5-year payment plan, you just may qualify for a partial pay plan instead.

Installment Agreement Partial-Pay Plans

A partial pay installment agreement plan is a repayment option that will allow you to pay only what you can manage on a month by month basis, even if the amount is less than what the Irs usually consents to in 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 60 months or 5 years. When the collection statute of limitations arrives at its expiration date, any remaining balance is then written off by the Internal Revenue Service. This payment plan is a partial pay installment agreement plan because you will never fully pay the debt 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

The partial pay 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. Calculate your disposable monthly income by the number of months remaining on your collection statute in order to determine the absolute dollar amount you will need to pay the Irs over a period of time. For example, if your disposable income is $100 and the time left on your collection statute is 24 months, or two years, you will have to pay $2,400 toward your tax liability. The rest is uncollectable by the Irs. Though, you need to make payments in installments and you cannot offer the full amount in a single payment.

Non-Streamlined Installment Agreements or Financially Verified Installment Agreement

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

Rules Applicable to the Installment Agreement Plan Options

Whatever option of repayment you request, a few basic rules apply for obtaining and retaining your installment agreement.

Offer In Compromise Rejection Period

Quite often, you are going to have to wait at least 60 days after the date stamped on your Offer in compromise rejection letter to be able to request an installment agreement. During this 60 day period, your file is coded as an “Offer” case in the Irs system to permit for your right to repeal the 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 in an installment agreement, you need to stay compliant and up to date with the payment calendar and future tax obligations. Which means that if you are on this contract, then you have to meet all installment payments in full and on time, file all tax returns as scheduled, and pay any forthcoming 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

Change in Financial Circumstance

If your financial circumstances change and this change dissallows you from making your monthly installements. Seek a lower rate to your monthly installment amount.

If this change to your finances is expected to last over a months time, you may proceed. Examples of qualifying financial changes are: divorce, a reduction in income, loss of income, the new addition of a dependent, or an increase in regular living expenses. The Internal Revenue Service requires documentation of this change in your financial statements.

A full-pay installment agreement may convert to a a partial pay plan if changes to your finances warrant such a change. Installment agreements are in many cases much less painless to set up with the Irs and demand less paper work than an OIC application. An installment agreement option is a solution to an Offer In Compromise rejection.

Experience the Offer In Compromise Guide at Redmond CPA