Installment Agreements & Payment Plans
Are you saddled with an insurmountable bill for your back taxes? IRS Installment agreements may offer a way out.
What Are Installment Agreements?
Installment agreements provide a way to pay what you owe to the IRS through a monthly payment plan. For many taxpayers with large back tax bills, paying what is owed at one time is simply not possible. Installment agreements make payments much more manageable and can be a viable alternative if you do not qualify for an offer in compromise or other tax liability relief. A tax lawyer in New Jersey can help you negotiate an IRS installment agreement you can afford.
Important Considerations About Installment Agreements
If you are considering entering into an IRS payment plan, there are some facts that New Jersey tax attorney, Todd S. Unger wants you to know about getting IRS help:
Tax payment plans may not be your most affordable option because interest and penalties continue to accrue throughout the payment plan. Consequently, you may find that borrowing against your assets to pay everything at once is a better option than executing an IRS payment plan. You should discuss all of your options with your tax lawyer.
Some lending options, like a second mortgage, may offer the benefit of tax deductible interest, whereas the interest and penalties on installment agreements are not deductible. Borrowing against, not withdrawing money from, a qualified retirement plan can also be an effective way to reduce your tax debt. There can be other financing options available to resolve your tax debt. You should discuss all of your options with a tax lawyer to achieve the fastest and most cost effective way of eliminating your back taxes.
If you do not have the credit or assets against which to borrow, then you may need to negotiate an IRS installment agreement.
Types of Installment Agreements
- Guaranteed Installment Agreement: If you owe $10,000 or less to the IRS excluding penalties and interest, all your returns are filed, and you have not been in trouble with the IRS in the past 5 years, you have a statutory right to an installment agreement as long as you can pay in full the amortized balance within 36 months. In most cases, the IRS will not file a tax lien as long as you are compliant with the terms of the installment agreement.
- Streamlined Installment Agreements for $25,000 or Less: If you can pay the back taxes you owe within 72 months, the balance owed is $25,000 or less, and you are current with all your filing requirements, then you can execute a payment plan with the IRS without disclosing your finances. The $25,000 threshold excludes assessed penalty and interest and includes individual and corporate income taxes and the trust fund recovery penalty. With a streamlined installment agreement, it is possible to negotiate the avoidance of a tax lien.
- Streamlined Installment Agreements for $25,001 to $50,000: If the back taxes you owe for all tax years is between $25,001 to $50,000, you can pay the amount owed within 72 months, and are current with all filing and payment requirements, then you can request streamlined installment agreement as long as you permit the government to directly debit from your bank account. Assessed penalty and interest is not included in calculating the dollar criteria. You can pay off income taxes, individual or corporate, and the trust fund penalty through a streamlined installment agreement. If you execute this type of installment agreement before the IRS files a tax lien, then you can avoid one from being filed in the future as long as you stay compliant.
- In-Business Trust Fund Express Installment Agreements: If you have a small business with employees, you may be eligible for this type of IRS payment plan. The advantage of an In-Business Trust Fund Express Installment Agreement is you do not need to complete a financial statement or financial verification as long as the taxes you owe is $25,000 or less at the time the agreement is established and you can pay the amount owed within 2 years. To be eligible, your business must be compliant with all of its filing and payment requirements and must enroll in a direct debit installment agreement if the unpaid balance of assessments is between $10,000 and $25,000.
- Partial Payment Installment Agreements: Generally speaking, the IRS has 10 years to collect back taxes. If a payment plan will not full pay the taxes owed within this time period, but you have an ability to pay back some of the taxes you owe, then you can attempt to negotiate a partial pay installment agreement. These are difficult agreements to execute because the IRS will require a financial disclosure and verification of assets, liabilities, income, and expenditures. The IRS will also require that a Notice of Federal Tax Lien is filed. Additionally, the government will reopen the case at a later date to ascertain whether your ability to pay has increased.
- Non-Streamlined Installment Agreements: If you do not qualify or cannot afford the above IRS payment plans, then you must complete an exhaustive financial disclosure and financial verification. Generally speaking, you will negotiate these payment plans with a local IRS collector known as a Revenue Officer. The Revenue Officer will ascertain your ability to pay, possibly require the liquidation of assets, and the elimination or reduction of household expenditures. In most of these cases, the IRS will file a tax lien to secure its interests against other creditors.
Negotiating an IRS Installment Agreements
The IRS will not negotiate with you if you have failed to file your tax return in a previous year or are not current with your estimated tax or payroll tax deposit requirements. Once an installment agreement is executed, you must remain in full compliance and pay all future taxes when due. You should discuss with a NJ tax attorney, your contractual obligations and responsibilities with the IRS to ensure that you have a complete understanding of your responsibilities under such agreements. The failure to stay compliant with the terms of the agreement can result in enforcement action and the filing of a tax lien. You should discuss any outstanding returns with your NJ tax attorney to ensure you do not face any challenges when negotiating with the IRS. Keep in mind, when owing any back taxes, the IRS is unlikely to back down.
When making a request for an IRS installment agreement, you may need to disclose your assets, including cash and bank accounts, liabilities, income and expenditures. If your request is accepted, you will continue If you cannot pay the IRS, then a tax attorney can analyze your individual circumstance, and advise and execute the best course of action. The Law Offices of Todd S. Unger, Esq. provides a confidential consultation. To resolve your back taxes, complete the above contact form or call tax lawyer Todd S. Unger, Esq. today (855)-896-1566.
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, as long as you are tax compliant, the IRS cannot seize your property, wages, or levy your bank accounts while the installment agreement offer is pending or while you are compliant with the terms of your installment agreement.
Much of the process of installment agreements is driven by the policies and procedures of the IRS, but there is room for interpretation and negotiation. New Jersey tax attorney Todd S. Unger has the experience and in-depth knowledge of IRS policies and tax laws to help you walk away with an affordable installment agreement.