- Instructor: Attorney Bob Schaller
- Lectures: 1
- Quizzes: 1
Installment Agreements Affected by OIC.
Is a taxpayer required to continue making installment agreement payments if the taxpayer plans on filing an Offer in Compromise? Yes, is the simple answer because the Offer in Compromise application has not yet been submitted and has not yet been approved for processing by the IRS. The answer changes once the IRS identifies the Offer in Compromise request as “pending.” An offer to compromise becomes pending when it is accepted for processing. 26 C.F.R. § 301-7122-1(d)(2).
A taxpayer is not required to make installment agreement payments while the Offer in Compromise application is being reviewed. See Form 656-B, Page 3, https://www.irs.gov/pub/irs-pdf/f656b.pdf. More specifically, a taxpayer is not required to make payments on existing installment agreements once the Offer in Compromise application is approved for processing. Offer in Compromise FAQs, https://www.irs.gov/businesses/small-businesses-self-employed/offer-in-compromise-faqs. The IRS no longer requires that installment agreements in effect prior to receipt of an Offer in Compromise remain in effect while an offer is being considered. IRM § 220.127.116.11.1 (10) (04-18-2016).
If the offer is not accepted ultimately and the taxpayer has not incurred any additional tax debt during the review, then the installment agreement with the IRS will be reinstated with no additional fee. See Form 656-B, Page 3, https://www.irs.gov/pub/irs-pdf/f656b.pdf. If the offer is rejected, the taxpayer’s installment agreement will be reinstated without any additional fee if the taxpayer filed all required tax returns and the taxpayer has not incurred any additional tax debt. Offer in Compromise FAQs, https://www.irs.gov/businesses/small-businesses-self-employed/offer-in-compromise-faqs. This requirement does not place any additional burden upon the taxpayer because compliance with filing tax returns and making tax payments is a requirement of the Offer in Compromise program.
Overview of How an OIC Affects an Installment Agreement