what are Installment Agreements?
Installment agreements are a viable alternative if you do not qualify for an offer in compromise, currently uncollectible status, or any other relief.
In order to qualify for an IRS payment plan, you must have filed all tax returns that are due. If you failed to file in a previous year, you must do so before you can enter into an installment agreement. When you make the request for the installment agreement, you may also be forced to disclose your assets, including cash, bank accounts, investments, etc.
In addition the IRS may still be able to file a Notice of Federal Tax Lien against you while your installment agreement request is pending or in effect. However, they cannot seize your property or wages during this time or for the first 30 days after an installment agreement request is rejected.
Negotiating an installment agreement
Driven by the policies and procedures of the IRS, there is room for interpretation and negotiation. At IRS Help, we strongly recommend that you consult with one of our tax professionals to determine if you qualify for an installment agreement that you can afford.
The following is a short list of factors to consider when attempting to obtain an Installment Agreement:
If your request is accepted, you will continue making your monthly payments until your entire tax liability is paid in full. Once an installment agreement is executed, the taxpayer must remain in compliance (file tax returns on time) and pay all future taxes when due.
- Interest and penalties continue to accrue. Borrowing options such as a second mortgage provide the benefit of tax deductible interest, whereas the interest and penalties on installment agreements are not deductible.
- If you owe $10,000 or under and all of your tax returns are filed, and you have not been in collection in the past, you have a statutory right to an installment agreement as long as you can pay the amortized balance in full within 36 months.
- If you owe less than $25,000 and the installment plan will repay the debt over five years or less, you may not need to make a financial disclosure. Instead, the amount you pay may be based entirely on what you owe and not your ability to pay.
- If you owe between $25,000 and $100,000, the IRS will determine your monthly payment amount considering your ability to pay and the total amount of the tax delinquency.
- If you owe more than $100,000, your application for an installment agreement will be referred to the “Large Dollar Unit,” which is the IRS’s most intrusive collection unit.
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