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 you submitted very well could posture you with a little anxiety and panic, but don’t fear -- you still have the choice of fulfilling payment of the amount owed in payments.



The Internal Revenue Service offers a couple different installment agreement payment options including full-payment installment plans and a partial-payment installment plan. Full-payment plans might be the guaranteed installment agreement, the streamlined installment agreement, and the financially verified installment agreement. The plan you are eligible for is based upon fiscal information you put forth to the Internal Revenue Service, but the monthly repayments for each of these programs are determined a bit differently than OIC settlement amounts.



In this discussion we will explain the repayment options and help you verfiy which option of payment is most advantageous for you.





The Guaranteed Installment Agreement



The guaranteed installment agreement plan is available only if your owed balance is not exceeding $10,000 and monthly installments will pay in full your full Irs owed debt within 36 months or 3 years. The Irs is required to consent to this purposed option if you conform to the requirements.





The Streamlined Installment Agreement Option



The streamlined installment agreement is is an option of repaying the IRS if your owed balance is not more than $25,000 and you consent to full-pay your total debt in the period of 60 months or 5 years. The total balance comprises 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 accept each month, divide the full amount you owe, including the interests and penalities, by fifty. The result will be the base amount that will have to 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 warrant a 5-year payment plan, you just may qualify for a partial payment plan instead.





Installment Agreement Partial-Pay Plans



A partial pay installment agreement plan is an option that allows you to pay only what you can afford to pay on a monthly basis, even if the amount is less than what the Irs normally consents to in an installment agreement. You must make payments for the remainder of the period the Internal Revenue Service can legally collect your debt, which 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 balance that remains is essentially written off . This payment option is a partial payment installment agreement plan because you will never completely pay the balance that you owe.



Statute of Limitations on Collection



A collection statute exists for each tax year you have a balance. 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 has transpired most recently. Generally, 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.



Calculating Payments



The partial pay installment agreement is assessed in terms of your disposable monthly income, or the amount of money left each month after your expenses are paid. Determine your monthly disposable income by the number of months that remain on your collection statute in order to calculate the total amount you are going to be responsible to pay the Irs over a period of time. That is, if disposable income is $100 and the duration of time remaining on the collection statute is two years, you pay $2,400 in total toward your tax liability. The rest is not collectable by the Internal Revenue Service. However, you have to make payments in installments - you can’t offer the amount in a single payment.





Financial Verified Installment Agreements or Non-Streamlined Installment Agreements



The financially verified or “Non-Streamlined” installment agreement is assessible when your owed balance is over $25,000 or when the repayment period exceeds five years. This agreement must be negotiated with the Irs. Complete financial disclosures are to be provided to the Irs. Your monthly payment amount is arrived at by reviewing your full-picture financial situation, and the Internal Revenue Service may possible require you liquidate assets in order to reduce the debt balance due.



Rules that Apply to the Installment Agreement Plans

Whichever type of payment plan you request, some general rules are applicable for retaining and obtaining an installment agreement contract.





Offer In Compromise Rejection Period



More often than not, you will have to wait at least a period of 60 days from the date stamped on your OIC rejection letter for you to request an installment agreement. During this sixty-day period, your file is marked as an "Offer" case in the Internal Revenue Service system to allow for your sanctioned right to appeal the rejection. Irs officers are unable to change the status of your case to establish an installment agreement contract.

Staying Current and Compliant



When you are in an installment contract, then you need to remain current and compliant with the determined payment calendar and new tax commitments. Meaning that while you are bound by the installment contract, you will need to meet all installment pay dates on time and in full, file all future tax returns according to the schedule, and pay all new tax 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.



When Financial Circumstances Change



If your financial circumstances change and this change dissallows you from keeping your scheduled installments. Appeal for a corresponding adjustment to your monthly installment payment.



If this change to your finances is expected to endure over a months time, 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 your regular living expenses. The Internal Revenue Service requires proof of this change in your financial statements.



Modifications may result in your full-pay installment agreement being converted to a partial payment plan. Installment agreements are generally easier to establish with the Internal Revenue Service and incur less desk work than an OIC application. The installment agreement option provides a fix to your OIC rejection.



Look at the Offer In Compromise Guide at