If the IRS agrees to an installment agreement or an offer in compromise, you’ll need to make payments based on your agreement with the IRS. You’ll also need to stay current in filing and paying your taxes during the time of the agreement, and if you enter into an offer in compromise, for five years after the IRS accepts your offer.
Penalties, interest, held refunds, and fees
- If the IRS agrees to an installment agreement, it will still charge penalties and interest and may file a Notice of Federal Tax Lien. For more information, see IRS Publication 594, The IRS Collection Process.
- If the IRS approves an installment agreement, it will generally keep any tax refunds and apply them to your debt.
- The IRS will also keep any refunds while your offer in compromise (OIC) is pending and in the year it accepts your OIC.
- You’ll need to pay a fee if you enter into an installment agreement, and generally must pay a user fee to enter into an offer in compromise.
Timeline for collecting debt
Usually the IRS has ten years from the date it assessed the tax (placed on your account) to collect the tax. The IRS will extend the time it has to collect while your request for an installment agreement or offer in compromise is pending. Other actions can extend the time to collect as well. IRS Publication 594, IRS Collection Process, covers this topic in detail.
If the IRS denies your request for a payment plan
If you’re eligible for an installment agreement or offer in compromise, and the IRS denies your request or rejects your offer, you have the right to appeal that decision to the IRS Office of Appeals. Use IRS Form 9423, Collection Appeal Request.
Also, see IRS Publication 594, IRS Collection Process.