An installment agreement with the Internal Revenue Service is an agreement whereby a taxpayer agrees to pay a certain amount of money on or before a certain day of each month to satisfy their outstanding tax debt with the IRS.  As a Denver tax attorney, John McGuire has established many installment agreements with the Internal Revenue Service on behalf of clients and the article below should provide useful information for any taxpayer looking to pay their taxes to the IRS via installments.
The IRS allows taxpayers to satisfy their debts by making installment payments. If your tax debt is $25,000 or less, the IRS is likely to allow an installment agreement without verification of financial information given you are willing to pay up to, or more than a certain amount. Moreover, if the tax debt is $50,000 or less, the IRS may formalize an installment agreement with minimal financial disclosure given that the amount proposed by the taxpayer will resolve the tax debt within a certain period of time, which is usually 72 months (or six years). These types of installment agreements are generally referred to as streamlined installment agreements.
If the taxpayer is unable to pay the amount of which would allow for a streamlined installment agreement, the IRS will require financial disclosure. This financial disclosure would consist of Form 433A for individuals and/or Form 433B for businesses. The IRS uses these collection information statements to determine what a taxpayer’s monthly ability to pay is and thus what they would request as a monthly installment agreement amount. Often the amount the IRS would request as a monthly payment will exceed what the taxpayer feels they can pay because the IRS applies national standards for allowable living expenses. If these standards are less than what the taxpayer actually pays for certain expenses, the IRS is likely to feel the taxpayer can pay more than they are offering to pay on a monthly basis.
Important considerations and issues regarding an installment agreement are stated below. Please feel free to contact our Denver tax attorneys to discuss any of these issues or related tax issues.
- Once an installment agreement is proposed, this can act as a hold on IRS enforcement.
- Once an installment agreement is formalized, the agreement will act as a hold on enforcement.
- To comply with the installment agreement, the taxpayer must make the required monthly payment and remain current and compliant by timely filing all tax returns and paying all future taxes.
- Upon formalization of the installment agreement the failure to pay penalty is reduced.
- The terms of an installment agreement can be amended due to changes in financial circumstances or even reduction of the tax debt. Further a taxpayer who is/was on an installment agreement may be able to default the installment agreement and submit an offer in compromise if their financial circumstances would allow them to be an offer in compromise candidate.
- A taxpayer can establish an installment by calling the IRS automated collection system, working with their assigned revenue officer or through a collection due process hearing.
A Columbus tax attorney at The McGuire Law Firm can assist you in establishing an installment agreement with the IRS if you have IRS tax debts, we can assist you with other IRS problems.