IRS
Installment
Agreement
An
IRS Installment Agreement may be your best option.
The process isn't automatic and there may be alternatives, but
if you are eligible, this could be the solution that makes
paying taxes easier. If you cannot pay the full amount of the
tax due and other options such as an Offer in Compromise do not
seem viable then you may ask to make monthly installment
payments.
You
will be charged interest and a late payment tax penalty by the
IRS on the tax not paid. Interest rates vary because they are
set quarterly.
Before
requesting a tax Installment Agreement from the IRS, you
should consider less costly alternatives, such as a bank loan.
For example, the interest on a bank loan may be less than the
combination of penalty and interest on an Installment Agreement
with the IRS. To figure this out you will need to know how much
interest the IRS will charge.
Partial
Payment Installment Agreements
Requesting
a Partial Payment Installment Agreement with the IRS can be one
way to avoid paying all of the debt and is easier to do, less
time consuming, and less expensive than requesting an Offer in
Compromise. In a Partial Payment Installment Agreement, the
taxpayer makes regular monthly payments to the IRS, but the
payments do not pay off the tax debt in full. After the terms of
the Installment Agreement are fulfilled, the remainder of the
tax debt is forgiven.
If
you are considering a partial pay you should look for a tax
professional with significant experience in IRS collection
matters. It is best to get all your ducks in a row before
broaching the subject with the IRS primarily because you will
want to use the Statute of Limitations to get rid of the debt
and you do not want the IRS to extend the term of the statute.
The IRS may require you to provide detailed financial
information prior to agreeing to an Installment Agreement.
The
IRS will use this information to determine how much they think
you can afford to pay and that information becomes a road map in
the event they later decide to place a levy on your assets.
Negotiating a monthly Installment Agreement should never be done
without an overall game plan in mind. I will help you to
understand the complexities of Partial Payment Installment
Agreements versus standard Installment Agreements as they relate
to your Statute of Limitations and your Collection Statute
Expiration dates.
Ignoring
your tax problems only makes matters worse because your case is
progressing through the IRS collection process,
unrelentingly. The sooner you take action the easier they are to
work with.
IRS
Installment Agreement Process
The
IRS encourages taxpayers to pay what they owe as quickly as
possible. For those individuals or businesses not able to
resolve a tax debt immediately, an Installment Agreement can be
a reasonable payment option. Installment Agreements allow for
the full payment of the tax debt in smaller, more manageable
amounts.
To
be eligible for an Installment Agreement, all back tax returns
that are due must first be filed.
Installment
Agreements generally require equal monthly payments. The amount
of an installment payment will be based on the amount owed and
on the taxpayer’s ability to pay that amount within the time
legally available for the IRS to collect. By law, the IRS has
the authority to collect outstanding federal taxes for ten years
from the date of assessment.
For
taxpayers that enter into an Installment Agreement, the IRS may
require a signed waiver to extend the time IRS can collect.
Taxpayers
who already have an Installment Agreement from a previous amount
owed may still find help. All of the amounts owed could be
included in one Installment Agreement. Additionally, a
Collection Information Statement may have to be completed to
further illustrate their financial situation.
As
a condition of an Installment Agreement, any refund due in a
future year will be applied against the amount owed.
Therefore, taxpayers may not get all of their refund if they owe
certain past-due amounts, such as federal tax, state tax,
student loans, or child support. The IRS Installment
Agreement Process will automatically apply the refund to the
taxes owed. If the refund does not take care of the tax
debt, then the Installment Agreement continues until all of the
terms are met.
Penalties
and Interest do not Stop with an Installment Agreement - but the
penalties are cut in half.
The
IRS Installment Agreement Process is more costly than paying all
the taxes owed now. Penalties and interest continue to be
charged on the unpaid portion of the debt throughout the
duration of an Installment Agreement.
NOTE: The interest rate on a loan or credit card may be
lower than the combination of penalties and interest imposed by
the Internal Revenue Code.
If
you would like additional information on IRS Installment
Agreements, please do not hesitate to call.
Ralph
Sayers, CPA
(877)
316-4331
ralphs@tampabay.rr.com
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