How to Negotiate an IRS Installment Agreement and Set Up a Payment Plan for Your Tax Debt

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 would 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.

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.

In most cases, the IRS will accept some type of payment arrangement for past due taxes.

However, if you owe more than $25,000 to the IRS, you will be required to provide full financial disclosure and you will need to hire specialized tax representation to negotiate on your behalf with the IRS. It is also important to know what the IRS may not necessarily tell you about payement plans.

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.

If you need help settling your tax debt, our specialized staff of attorneys, CPAs, EAs and tax professionals can help you successfully resolve your IRS problems. Visit the Tax Resolution Services web site  for a free tax relief consultation or call us at 866-477-7762.

More Tax Help, IRS News and Tax Relief Tips:

  1. IRS Announces Unprecedented Opportunity for Recession-Burdened Americans to Settle Outstanding Tax Debts
  2. Melt Your IRS Fears Away – Tax Help if You Can’t Afford to Pay Your 2008 Taxes
  3. KLOS Tax Tip #44: Individuals Get a Tax Break – But Get Tax Help if You Owe Back Taxes!
  4. Options for Business Owners Struggling to Meet the April 15 Tax Deadline
  5. Michael Rozbruch Interviewed in Opportunist Magazine

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4 Responses to “How to Negotiate an IRS Installment Agreement and Set Up a Payment Plan for Your Tax Debt”

  1. » What the IRS May Not Tell You About Payment Plans » Tax Relief Tips from the Experts at Tax Resolution University » Blog Archive Says:

    [...] economy, more taxpayers are going to need tax help and will be hoping to pay their tax debt by negotiating payment plans with the IRS to pay their liabilities over [...]

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    [...] afford to pay you taxes this year, there are options like negotiating a tax settlement or a payment plan. You can also seek professional tax help so that your account is placed under “currently not [...]

  3. » IRS Pledges Greater Flexibility to Help Distressed Taxpayers on Payment Plans » Tax Relief Tips from the Experts at Tax Resolution University » Blog Archive Says:

    [...] way recession-burdened Americans can settle back taxes is by negotiating an Installment Agreement with the government that that allows payment of liabilities over time. And now, if a taxpayer with [...]

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