Establishing an Installment Agreement With the IRS: Guidance for Ohio Taxpayers

Establishing an Installment Agreement With the IRS: Guidance for Ohio Taxpayers

It is surprisingly common for individuals and businesses to owe taxes to the IRS. If you or your business owe federal taxes and do not qualify for an Offer in Compromise due to income or assets, an installment agreement with the IRS may be used to resolve the tax debt.

This article, prepared by a tax attorney, provides an overview of how installment agreements work and explains the benefits of entering into an installment agreement for taxpayers in Columbus, Ohio, and throughout OH.

How Do I Establish an Installment Agreement With the IRS?

Depending on the amount of tax owed and your ability to make monthly payments, you may be able to establish an installment agreement without providing financial information to the IRS.

Under this scenario, a taxpayer may:

• Contact the IRS by phone to request an installment agreement, or
• Establish an installment agreement online

If the tax debt is too large or the proposed monthly payment is insufficient based on the amount owed and the collection statute, the IRS will require financial disclosure.

Financial Statements and IRS Expense Standards

When financial disclosure is required, the IRS generally requests that individuals submit:

• Form 433-A, or
• Form 433-F, along with supporting documentation.

The IRS will apply national standards for allowable living expenses, including amounts for:

• Food
• Clothing
• Housing
• Utilities
• Transportation
• Vehicle ownership

When these standards are applied, the IRS’s view of a taxpayer’s disposable income may differ from the taxpayer’s actual monthly ability to pay.

For example, if a taxpayer’s housing and utilities cost $2,750 per month but the IRS allows only $2,000 under the national standards, there may be a $750 difference between what the IRS believes the taxpayer can pay and what the taxpayer believes they can afford.

Submitting the Financial Information

Once the financial statement is completed, along with required attachments—such as:

• Bank statements
• Pay stubs
• Income documentation
• Asset information
• Mortgage statements or lease agreements

—the information is submitted to IRS Collections or to the assigned IRS Revenue Officer, if one has been assigned.

The IRS may then:

• Request additional information
• Agree to the proposed installment agreement
• Request a different monthly payment amount
• Reject the proposed installment agreement

You do not have the right to appeal the rejection of a proposed installment agreement to the IRS Appeals Office.

Depending on the facts and circumstances, this discrepancy may be addressed. There is a “12 Month Rule” that allows a taxpayer to establish an installment agreement based on actual expenses rather than national standards.

What If I Cannot Establish an Installment Agreement With the IRS?

As stated above, if a proposed installment agreement is rejected, the taxpayer has the right to appeal the rejection. However, if an installment agreement cannot be accepted through the IRS Appeals Office, other options may still exist.

A taxpayer may choose to make voluntary payments toward the tax liability. If the IRS has not issued a Final Notice of Intent to Levy, many taxpayers are able to make voluntary payments and resolve the debt over time without a formal installment agreement and without IRS enforcement action.

Other possible options include:

• Obtaining a loan from a bank or family member to fully pay the tax debt
• Reducing the balance enough to fall below IRS thresholds
• Combining smaller monthly payments with a lump-sum payment

Speaking With a Columbus, Ohio Tax Attorney About IRS Installment Agreements

If you owe taxes to the IRS and are unable to establish an installment agreement, it may be advisable to speak with a tax attorney about your options.

A tax attorney can review your situation, discuss potential payment arrangements, and help you evaluate next steps. You can speak with a Columbus tax attorney by contacting The McGuire Law Firm, which assists taxpayers throughout Ohio (OH) with IRS tax issues.