Rejection from the Irs on an OIC application might lend you with some worry, however dont fret -- you may still be eligible the option of repaying the balance in payment installments.
The Internal Revenue Service grants a few diffferent installment agreement options including full-payment installment plans and a partial-payment installment plan. Full-payment plans include the promised installment agreement, the streamlined installment agreement, and the financially verified installment agreement. The option you are eligible for is based upon fiscal info you put forth to the Internal Revenue Service, but each monthly payment installments for the different options are determined differently than OIC settlement amounts.
In this conversation we will break down the payment options and help you define which plan is most apt for you.
Guaranteed Installment Agreement
The guaranteed installment agreement is available only if your balance due is less than $10,000 and payments will full-pay your total Internal Revenue Service balance within a period of 3 years or 36 months. The Irs is mandated to concede to this option if you fit the requirements.
The Streamlined Installment Agreement
This streamlined installment agreement is is a means a payment if your due balance is not more than $25,000 and you agree to pay in full your complete IRS balance within the period of 5 years or 60 months. The full balance considers your principal tax liability, plus interest and penalty accruals for each tax year you have a balance on.
Calculating Your Monthly Payment Installments
In order to calculate the lowest amount the Internal Revenue Service will concent to each month, divide the total amount owed, including the interest and the penalties, by 50. The resulting number will show the base amount that must be paid. The last 10 months of the 60-month payment plan is set aside for interest. If you have insufficient disposable monthly income to warrant a 60-month payment plan, you could qualify for a partial payment plan in lieu.
Partial Pay Installment Agreement
A partial payment installment agreement is a plan that makes concessions for you to make payments of only what you are able to pay on a monthly basis, even if the amount is under what the Internal Revenue Service typically consents to in an installment agreement plan. You must make payments for the remainder of the period the Internal Revenue Service can by law collect debt, which might be for an amount of time longer than 60 months or 5 years. When the collection statute of limitations comes to its expiration date, any balance that remains is essentially written off by the Internal Revenue Service. This plan is a partial pay installment agreement because you never will pay the absolute balance you owe.
Statute of Limitations on Collection
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 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
The partial pay installment agreement is assessed in terms of your disposable income on a monthly basis, which is the amount of money you have left each month after your expenses are paid. Determine your disposable monthly income by the number of months remaining on your collection statute in order to calculate the absolute amount you are going to need to pay the Internal Revenue Service over a period of time. That is, if disposable income is $100 and the time remaining on the collection statute is two years, you will pay $2,400 total towards your tax liability. The remainder is not collectable by the Irs. Though, you have to make the payments in set installments and you cant offer the full amount in a single payment.
Non-Streamlined Installment Agreements or Financially Verified Installment Agreement
The non-streamlined or financially verfied agreement is assessible if your balance due is over $25,000 or when the repayment period exceeds 5 years. This agreement must be negotiated with the Internal Revenue Service. Full financial disclosures are to be imparted to the Irs. Your monthly payment amount is arrived at by reviewing your complete financial situation, and the Internal Revenue Service could potentially require that you liquidate assets in order to reduce the reduce the tax debt balance.
Applicable Rules to all Installment Agreement Plans
Whatever type of payment you request, some basic rules apply for retaining and obtaining an installment contract.
Offer In Compromise Rejection Period
Most of the time, you are going to have to wait at least a period of 60 days post the date of your OIC rejection letter in order to request an installment agreement option. During this sixty-day period, your file is marked as an Offer case in the Internal Revenue Service system to permit for your sanctioned right to repeal the OIC rejection. Internal Revenue Service officers are unable to pull your case out of this status to establish an installment agreement contract.
Staying Current and Compliant
When you are in an installment agreement, then you must remain up to date and compliant with the determined payment arrangements and new tax commitments. This means while you are binded to the installment contract, you must make all installment pay dates on time and in full, file all tax returns according to the schedule, and pay any 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.
When Financial Circumstances Change
If your financial circumstances change and this change dissallows you from meeting your scheduled installments. Seek an adjustment to your monthly installment payment.
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 might convert to a a partial pay plan if changes to your finances warrant such a change. Installment agreements are usually more simple to set up with the Irs and demand less desk work than an Offer In Compromise process. The installment agreement plan provides a an alternative to your Offer In Compromise rejection.
Visit the Offer In Compromise Guide at
Kent CPA
