Rejection from the IRS on an offer in compromise application might perhaps fill you with a bit of stress and panic, however don’t agonize — you can proceed with the option of satisfying the payment of the balance in installments.
The Internal Revenue Service offers some different installment agreement options including partial-payment installment plans or full-payment installment plans. Full-payment plans include the streamlined installment agreement, the promised installment agreement, and the financially verified installment agreement. The payment option you qualify for is dependent on financial info you lay out to the IRS, but the monthly payment installments for these types options are calculated differently than Offer in compromise settlement amounts.
In this discussion we will break down these repayment options and help you verify which plan of repayment is most convenient for you.
The Guaranteed Installment Agreement Option
The guaranteed installment agreement option is available only if your balance is not exceeding $10,000 and your installments will pay in full your full IRS tax debt within a period of 36 months. The IRS must agree to this purposed option if you conform with their requirements.
Streamlined Installment Agreement
This streamlined installment agreement is an option of repaying the IRS if your tax debt is equal to or under $25,000 and you agree to pay in full your full balance in the period of 60 months or 5 years. This full balance considers your principal tax liability, plus interest and penalty accruals for each tax year you have a balance on.
Calculating The Monthly Payment Installments
In order to figure out the base amount the IRS will permit each month, divide the full amount you owe, including the interest and the penalties, by fifty. The resulting number will tell the lowest amount that must 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 allow for a 60-month payment plan, you just might qualify for a partial payment plan instead.
Installment Agreement Partial-Pay Plans
A partial pay installment agreement plan is an option that will allow you to make payments of only what you can manage on a month by month basis, even if the amount is under what the IRS normally accepts on an installment agreement. You must make payments for the remainder of the period the Internal Revenue Service can by law collect your debt, this could be for an amount of time longer than 60 months. And when the collection statute of limitations arrives at its expiration date, any balance that remains is then written off. This repayment option is a partial pay installment agreement as you will never pay the full of the balance that you owe.
Statute of Limitations on Collection
A statute for collection exists in each tax year you have a tax instalator sanitar debt balance. The statute begins when you file your tax return, or the date in which a principal tax balance is assessed, whatever is more recent. The statue will usually end within 10 years, though there are certain instances when a collection statute can extend passed 10 years. You or your power of Attorney may contact the IRS and request the Collection Statue Expiration Date (CSED) for each balance-due period.
How to Determine Payments
Your partial payment installment agreement is determined by your disposable monthly income, which is the remainder left each month after your expenses are paid. Determine your monthly disposable income by the number of months which remain on your collection statute to calculate the absolute dollar amount you are going to 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 the collection statute is two years, you will have to pay $2,400 in total toward the tax liability. The remainder is uncollectable by the IRS. However, you need to make these payments in installments and you can’t offer the full amount in a lump sum.
Financially Verified Installment Agreement
The non-streamlined or financially verified agreement is available when your owed balance is over $25,000 or where the repayment period exceeds 60 months. This agreement must be negotiated with the IRS. Full financial disclosures are to be imparted to the IRS. Your monthly payment amount is based on your complete financial situation, and the IRS may require you liquidate assets in order to reduce the debt balance due.
Rules to the Installment Agreement Plans
Regardless of the option of payment you request, a few general rules are applicable for retaining and obtaining an installment agreement.
OIC Rejection Period
Quite often, you must wait at least 60 days from the date of your Offer in compromise rejection letter 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 Offer in Compromise rejection. IRS officers are unable to change the status of your case to establish an installment agreement contract.
Staying Compliant and Current
When you are in an installment agreement, then you need to stay current and compliant with the payment arrangements and forthcoming tax obligations. Meaning that if you’re bound by this contract, then you have to make all installment payments on time and in full, file all tax returns according to the schedule, and pay all forthcoming tax balances in full and on time.
You will be opened up to various IRS collection measures if you fail to comply with regulations and default on your payment plan.
When Financial Circumstances Change
If your financial circumstances change and this change stops you from making the monthly installments. Pursue a decrease to your monthly installment amount.
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.
A full-pay installment agreement could possibly convert to a partial pay plan if changes to your finances warrant such a change. Installment agreements are generally less painless to establish with the IRS and incur less paper work than an OIC process. An installment agreement plan provides a solution to your Offer In Compromise rejection.