An Installment Agreement is a payment arrangement whereby the government allows a taxpayer to pay liabilities over time. Once a payment plan is established, the IRS will not take enforced collection action, including the levy of bank accounts or wages, as long as the taxpayer remains current with all filing and payment obligations. However, interest and penalties continue to accrue until the outstanding balance is satisfied. Additionally, a tax lien may be filed as part of the terms of the installment payment agreement, depending on the amount of the total liability.
If you owe $10,000 or under, and all your returns are filed, and you have not been in trouble with the IRS before, generally, the IRS guarantees to place you in a payment plan as long as you can fully pay the amortized balance in 36 months. The taxpayer can probably accomplish this themselves without representation.
If you owe between $10,001 and $24,999, and all your returns are filed, the IRS will negotiate what they consider a ‘streamline’ payment plan. They will negotiate this requiring the minimum amount of financial disclosure by the taxpayer by having the taxpayer complete a 433-F (small case Collection Information Statement).
The IRS will demand full financial disclosure by completing a Collection Information Statement called a 433-A. They will most likely ask for supporting documentation like bank statements, pay stubs and cancelled checks to validate or prove your income and expenses.
If you owe over $100,000, your case will be forwarded to the ‘large Dollar Unit’. This is a nationally centralized special unit of the IRS that only deals with payment plans involving liabilities over $100,000. This is the IRS’s most intrusive Collection division. They are brutal here. If you wish to go it alone, without expert representation, you WILL get creamed.
For example, before they will even entertain negotiating a payment plan, they will require you to exhaust all efforts to liquidate your assets including your home. We deal with this unit every day of the week. We know how to navigate the maze, protocols, laws, etc. so you don’t have to lose your home or other assets,but you MUST take the first step and CALL NOW 214.891.2186.
Whether the IRS is demanding full payment up-front or a payment plan that is substantially higher than what you can afford to pay, we can negotiate to set up an arrangement for the lowest possible monthly payment and also provide you with various options for making those payments, including payment through the Electronic Federal Tax Payment System, direct debit, payroll deduction, credit card, and payment by check or money order. Since the government will not agree to an installment agreement until all necessary tax returns are filed, we can also prepare and file any and all returns to bring you into compliance before arranging a payment plan.
If you cannot afford to make monthly payments and do not qualify for another type of tax relief, such as an offer in compromise, we will negotiate to have your account placed in a “currently not collectible” status. By doing so, you will not be required to make any payments and the IRS will not pursue collection action. This option may provide you with an opportunity to wait for the collections statute to run out and the liabilities to expire.
Payment Plan – IRS Payment Plan 2
In most cases, the IRS will accept some type of payment arrangement for past due taxes. In order to qualify for a payment plan with the IRS you must meet the following rules and provide the IRS with this information:
- You must have filed all tax returns (It’s OK to owe money but you must file).
- You will need to disclose all assets owned including all cash and bank accounts.
- You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
- You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
- You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA’s or 401K’s.
The total dollar amount you owe usually dictates with whom the negotiations will be handled. Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $25,000. The IRS will ask you to complete a personal financial statement and if a business is involved, you will also need a business financial statement.
The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses. The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis. These monthly payments will continue until your outstanding tax liabilities are paid in full. Note: The IRS continues to add penalties and interest while you are making monthly payments.
This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest. The IRS may not explain this to you! Be careful!