Installment agreements
(IA's) are a widely used tool for tax collection. They are generally used when
you are unable to pay the tax but you can pay enough each month to pay off the
tax in a reasonable amount of time - generally no more than five years.
Unfortunately, I have seen hundreds of IA's in cases where the amount paid
monthly does not even cover the accruing interest. If this is true in your case,
you should consider an Offer In Compromise.
If you have just filed your return and find that you are unable to pay the
entire balance, you can request an installment agreement using Form 9465 or by
phone to IRS collection personnel. If you owe no other tax, the balance is
less than $25,000, and you can pay it off in five years or less, the agreement
is generally granted without the need for providing any financial information.
You tell them how much you can pay and on what day of the month you will be
making the payment.
If you do not meet the
requirements for an automatic installment agreement , the IRS will likely
require you to provide some information regarding your monthly income and
expenses. In most cases they will require you to complete Form 433-A (and Form
433-B if you are self-employed). Please read the page dealing with the 433-A by
clicking below.
Often times, an IA will only be offered to you if you also sign an agreement to
extend the statute of limitations for collection of the tax. If you are asked to
do this, please seek a professional experienced in these situations, sometimes I
advise to sign statute extensions, but most of the time it is the wrong thing to
do. If you get backed into a corner, tell them you wish to seek representation.
If they refuse, ask to speak to their Group Manager or supervisor.
An installment agreement requires that you pay a $105 fee up front and $24 each
time you default. They will subtract it from your first payment If you
fail to file or pay timely in the future or fail to make estimated tax payments
if you are self-employed, the IA will automatically default. You will have to
start the process all over again.
If the amount you can pay is not enough to pay off the liability in the time remaining on the statute of limitations for collections, plus five years, the IRS CANNOT compel you to enter into an installment agreement or sign a statute extension.
Our office is ready, willing and able to advise you or to assist you in entering into an IA or filing an Offer in Compromise. We will negotiate the lowest possible installment agreement. Contact us today to learn more.
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