IRS Installment Agreements And The Best Options For You
Installment Agreement or Die!
Either you understand how to get an agreement status code properly or not.
Either you know the unwritten rules for breaking an installment agreement or not.
Just about everyone I speak to, regardless if they got an agreement themselves or hired someone to do it, is in danger of collection action! So if life was an on line computer game, the damaging effect of wage and bank levies will kill you. Why live with the uncertainty?
My clients who follow my procedures do not suffer collection action, period!
Payment agreements, payment plans and payment options are other names for IRS installment agreements. If you have back taxes, an installment agreement might be the solution for your IRS debt. If approved, the IRS will not take any collection action against you or your property. By negotiating an installment agreement with the IRS, you can settle your back taxes by making monthly payments. However, the penalties and interest will continue to accrue during the installment agreement period.
Most taxpayers, who owe back taxes and can’t afford to pay the amount owed, usually need to set up an installment agreement plan with the Internal Service Revenue. The IRS is interested in collecting money from taxpayers and is willing to consent to a reasonable payment plan.
How To Qualify For An Installment Agreement
In order to be eligible for a payment plan for your tax debt, the IRS wants to see that you filed all your past tax returns.
Another condition is to make your payments established within the installment agreement in a timely manner. The IRS has the right to revoke the installment agreement, if you don’t make your payments in time. It is recommended to have your payment contribution made before the due date to avoid any banking delays or money transfer errors.
Terms of the installment agreement requires that self-employees to be current on their quarterly estimated tax payments for the current year. Employers must be current on payroll tax deposits and form 941 filings to qualify for a payment plan.
Negotiate An Installment Agreement With The IRS
Setting up an installment agreement with the IRS and making monthly payments will reduce your tax liability.
If you owe 10,000 or less, you may be able to set up a low dollar installment agreement (not requiring a manager’s approval) by requesting it and providing the information necessary to prove your income, assets and your expenses.
However, it is important to know how to negotiate your payment plan if you are looking to reduce your tax debt. A tax advisor can help you lower your monthly payments, and make sure you don’t break the agreement, causing a levy.
If you owe more than 10,000, you will probably need a tax representative for your installment agreement negotiations’ with the IRS. Your tax advisor can help you set up an installment agreement. Even more, after analyzing your financial situation, a good tax negotiator can propose an affordable payment plan for your convenience. The IRS representatives will review your Collection Information Statement on Form 433-A or Form 433-F and they will make a determination as to whether accept or reject your proposal.
If they agree to your monthly payment offer, you must commit to make your payments in time.
Types Of Payment Plans
The IRS allows few types of payment plans that generally differ on the amount of tax debt and the time estimated for the collection tax debt. Taxpayers’ financial ability to make payments for their IRS debt is another factor that determines the type of payment plan.
Guaranteed Payment Plan or Installment Agreement
The IRS allows a Guaranteed Payment Plan if the amount of tax you owe does not exceed $10,000. The IRS will require you to pay off your tax debt within 3 years. Another condition is to commit to file future tax returns, and pay liabilities on time.
Streamlined IRS Payment Plan Or Installment Agreement
If you owe $25,000 or less you can qualify for this payment plan. You must agree to pay off your tax debt within 5 years. When analyzing your current financial situation, the IRS may not require you to fill out a financial statement. For this agreement installment, the IRS may not file a Federal Tax Lien against you as part of the installment payment agreement.
Financially Verified Installment Agreement
It is best to have a tax professional help in negotiating an installment agreement with the IRS when you owe $25,000 or more. For this type of payment plan, you must provide the IRS with relevant information on your current financial situation.
IRS Partial Payment Installment Agreement
If you have an IRS tax debt and you can not afford to pay off the amount of tax debt within 5 years, the IRS offers a partial payment plan. Full financial disclosure is required. The IRS will ask you to fill out form 433 -F, reporting your income and your living expenses. As the partial payment installment allows taxpayers more time to pay their tax debt, the IRS will probably file a Federal Tax Lien.
IRS Reasons To Reject An Installment Agreement
Avoid having your payment plan proposal rejected by the IRS. The most common explanations the IRS offers when they reject an installment agreement are related to the following situations.
Not all your living expenses reported in your financial statement are considered “necessary” by the IRS officers. When owing money to the IRS, the collection officers may not understand your expenses, beyond the table allowances.
When requesting an installment agreement be honest in declaring your financial situation. Most of the cases, the IRS will agree with a payment plan at the same level. The IRS generally refuses installment agreement proposals, based on incomplete or untruthful information provided on the Collection Information Statement. The IRS will question your financial statement when it doesn’t match the information they have in their records.
When The IRS Installment Agreement Is Terminated
Once the IRS agrees with your payment plan, you must comply with the installment agreement terms. Most common reasons the IRS uses to revoke an installment agreement are related to your taxpayer responsibilities.
- If you miss or fail to make a payment, your installment agreement will be revoked. Usually the IRS will wait at least 30 days. The IRS will also give you a warning before your installment agreement will be terminated. You can request to reinstate your payment plan. The IRS will reinstate Installment Agreements that went delinquent within three months of the request. The IRS will charge a $43.00 fee to reinstate a defaulted monthly payment plan.
- You committed to file your current tax returns and pay your income taxes on time. If you fail to file current tax returns, after receiving the IRS approval for an installment agreement, the IRS has to right to cancel the installment agreement. You must also make your payments early enough for the IRS to post it to your account prior to the monthly due date.
- If the IRS discovers that your Collection Information Statement was incorrect or untruthful, the IRS can terminate the installment agreement initially accepted.
Appeal An IRS Installment Agreement
If your Installment Agreement was rejected or terminated, you are entitled to appeal the IRS decision.
In requesting an appeal consult a tax advisor. Most of the time, the Collection Information Statement plays a major role in determining the decision to reject or terminate an Installment Agreement. Look for a tax professional who has many years of experience in helping taxpayers with installment agreements and who has most of the taxpayers’ Installment Agreements accepted.
We can settle your back taxes for affordable monthly payments. Call us now and will start negotiating an installment agreement with the IRS!
- If you are considering hiring us, call Joe Mastriano, CPA 713-774-4467.
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