Requesting an Installment Agreement after rejection of Offer In Compromise

Rejection from the Irs on an Offer in compromise application could posture you with a bit of nervousness, however do not fret — you have still got the choice of fulfilling payment of your full balance in payment installments.

The Internal Revenue Service grants a few installment agreement options for instance full-payment installment plans or partial-payment installment plans . Full-payment plans might be the streamlined installment agreement, the guaranteed installment agreement, and the financially verified installment agreement. The payment option you are eligible for is dependent on financial details you supply to the Internal Revenue Service, but each monthly repayments for each different options are calculated a little differently than Offer in compromise settlement amounts.

In this write-up, we will examine these repayment plans and assist you identify which settlement option is most appropriate for you.

The Guaranteed Installment Agreement

The guaranteed installment agreement option is available only if your tax debt is under $10,000 and installments will pay in full your full Irs owed balance in 3 years or 36 months. The Internal Revenue Service is mandated to consent to this type of plan if you meet the requirements.

Streamlined Installment Agreement

The streamlined installment agreement option is is an option of repaying the IRS if your owed balance does not exceed $25,000 and you promise to full-pay your full debt in the period of 5 years. This full balance takes into consideration your principal tax liability, plus penalty accruals and interest for each tax year you have a balance.

Determining Your Monthly Payment

In order to figure out the minimum amount the Internal Revenue Service will concent to each month, divide the total amount owed, including the interests and penalities, by 50. The result is going to be the base amount you must pay. The left-over 10 months of the 60-month payment plan is set aside for interest. If you do not have sufficient disposable monthly income to support a 5-year payment plan, you might meet the criteria for a partial payment plan in lieu.

Installment Agreement Partial Payment Plans

A partial pay installment agreement plan is a plan that will allow you to pay only what you can manage to pay on a per month basis, even if the amount is below what the Internal Revenue Service normally accepts on an installment agreement. You must make payments for the remainder of the period in which the Irs can by law collect debt, which might be for a period longer than 60 months. And when the collection statute of limitations expires, any remaining balance is then written off by the Irs. The plan is a partial pay installment agreement as you will never pay the full of the debt balance 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.

Determining Payments

Your partial payment installment agreement is determined by your disposable income on a monthly basis, which is the money left each month after your expenses are paid. Calculate your disposable monthly income by the number of months you have remaining on your collection statute in order to calculate the full dollar amount you will have to pay the Irs over a period of time. For example, if your disposable income is one hundred dollars and the amount of time left on your collection statute is two years, you will have to pay $2,400 in total toward your tax liability. The remainder is not collectable by the Internal Revenue Service. Though, you have to make payments in installments and you can’t offer the full amount in a single lump sum payment.

Financially Verified Installment Agreement

The financially verified or “Non-Streamlined” installment agreement is assessible if your balance due 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. Full financial disclosures must be furnished to the Irs. Your monthly payment amount is determined by your full-picture financial situation, and the Internal Revenue Service could likely require you liquidate assets so as to reduce the balance.

Rules Applicable to all Installment Agreement Plans

Whatever the type of repayment you request, a few base rules apply for retaining and obtaining an installment contract.

Offer In Compromise Rejection Period

Generally, you will have to wait at the least a period of sixty days from the date marked on your OIC rejection letter to be able 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 legal right to repeal the rejected OIC. Internal Revenue Service officers are unable to pull your case out of this status to mark it as an installment agreement.

Staying Current and Compliant

When you are on an installment contract, then you must remain compliant and up to date with the payment arrangements and future tax commitments. Meaning that while you’re bound by the installment agreement, then you will have to meet all installment pay dates in full and on time, file all future tax returns according to the schedule, and pay all new balances on time and in full.

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 dissallows you from making your scheduled installments. Request a corresponding adjustment to your monthly installment payment.

If this change to your finances is expected to endure over a months time, you may proceed. Such examples of qualifying financial changes are: divorce, a reduction in income, loss of income, the 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 might convert to a a partial payment plan if changes to your finances warrant such a change. Installment agreements are generally much less effortless to arrange with the Irs and incur less paper work than an Offer In Compromise process. This installment agreement option is a fix to your Offer In Compromise rejection.

Experience the Offer In Compromise Guide at Yakima CPA