Does it make sense to request Installment Plan before submitting an Offer in Compromise?

[bhuether]

Hi,

I have insane tax bill for 2021 and am preparing an OIC.  Since an OIC takes a while to review, I am trying to get an installment plan in place so that the monthly penalty is lower.  So I filled out a 9465, since when I try to do it online it doesn't allow me, since my proposed monthly amount does not pay the bill in 72 months.

Does it make sense to do it this way?

thanks,

Brian

[DMarkM1]

No.  The Offer in Compromise would come into play if you cannot pay the debt in 72 months as part of an installment agreement.  

According to IRS Topic 204, Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC in most cases.  

[bhuether]

Hi,

As I understand OIC process can last up to a year or so.  In the meantime I was hoping to reduce the monthly late penalty from .5% to .25%, and I thought a payment plan was needed for that.  So I thought I would fill out form 9465. I see on that form:

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Divide the amount on line 9 by 72.0 and enter the result . . . . . . . . .
Enter the amount you can pay each month. Make your payment as large as possible to limit interest and penalty charges, as these charges will continue to accrue until you pay in full. If you have an existing installment agreement, this amount should represent your total proposed monthly payment amount for all your liabilities. If no payment amount is listed on line 11a, a payment will be determined for you by dividing the balance due on line 9 by 72 months . . . . . . .

If the amount on line 11a is less than the amount on line 10 and you’re able to increase your payment
to an amount that is equal to or greater than the amount on line 10, enter your revised monthly payment
If you can’t increase your payment on line 11b to more than or equal to the amount shown on line 10, check the box. Also, complete and attach Form 433-F, Collection Information Statement . . . .

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So in my case, I know I can't pay the minimum amount needed to pay the tax off in 6 years, which is why on the form I specify a smaller amount. I also checked off that I can't add anything to increase it.

It goes on to say

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If the amount on line 11a (or 11b, if applicable) is more than or equal to the amount on line 10 and the amount you owe is over $25,000 but not more than $50,000, then you don’t have to complete Form 433-F. However, if you don’t complete Form 433-F, then you must complete either line 13 or 14.

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So I started filling out the 433-F, and noticed it is similar info to what I am filling out in the form 433-A for the OIC...

In any case the goal now is to pay what I can monthly and have an agreement to reduce the monthly penalty to .25%, and in parallel submit OIC.

Does this not seem like the right approach?

thanks,