When the IRS is taking collections actions, they likely will be putting a lot of pressure on you to pay hundreds or even thousands of dollars in an unreasonably short period of time.
The bad news is that the IRS can legally continue to collect late taxes for ten years after the initial assessment. This period can be extended for ten more years in some cases.
If you find yourself in this situation, don’t worry—you are not alone, and there are options. Millions of Americans have tax debt that they feel is difficult or impossible to pay. What many don’t realize is that it is entirely possible to pay back IRS debts in a way that works for both parties.
One type of solution is to set up an installment agreement.
Different types of installment agreements:
Different types of installment agreements may be more effective, depending on your particular situation: Guaranteed agreements, streamlined agreements and non-streamlined agreements. You have to remember that, no matter which solution you choose, these agreements are binding and default consequences may even be more extreme than original collections processes.
If you feel that you are being unreasonably forced into making payments that you cannot afford, please give us a call to discuss your options.
Are installment agreements effective?
Most taxpayers will benefit from entering into a monthly installment agreement with the IRS rather than simply remitting payments to the IRS periodically. This payments are set up in a formal or informal way.
The primary benefit of an installment agreement is that the IRS will not pursue collections actions when the taxpayer is complying with an agreed upon monthly installment agreement. This allows the taxpayer the freedom to live without the undue stress of the IRS levying their bank account, garnishing their wages, or taking their property.
This collections benefit is particularly useful given that the monthly installment agreement does not necessarily have to be in an amount that would fully pay your tax debt before the time expires for the IRS to collect the debt.
How the IRS assesses income for installment agreements.
The IRS generally considers your “reasonable collection potential” rather than the total amount of your tax debt when they are assessing your monthly agreement amount. The IRS will also consider the total amount of the debt, but are more likely to prioritize their decision based on your ability to pay a monthly amount. So this will depend on your income and assets.
The rules behind this process are quite complex and difficult to understand for most people. If you owe the IRS an unpaid tax debt, contact us immediately to get help understanding your options and to see if you will qualify for an installment agreement.
Please note that in order to be considered for an agreement like this, you will have had to file all of your tax returns. We can help with this.
Why many tax installment agreements fail.
Installment plans may or may not be effective. An example of a situation where a plan may not be effective is if your financial situation and ability to pay has changed since the time you entered into the agreement–for instance if you have suffered a job loss, health crisis or divorce.
It may also happen that you are continuing to accrue interest and penalties as you are paying the debt off, making it impossible to pay off.
The viability of an installment agreement may need to be reviewed by a tax professional if:
- You have previous interest and penalties (they will keep being added to your principal amount owing)
- The initiation fee is too high
- The payments have been increased by the IRS
- Tax liens have been filed against you
- You have missed your payments
- If the agreement is over too long of a time period for you to see relief
If you have previously negotiated an installment agreement but are finding that you are still unable to pay, it may be possible to re-negotiate an installment plan. It may be that an installment plan is not working for you and that you need to find another solution.
Act now to get the best installment agreement possible.
We can help to re-asses your situation, find an alternative solution or get your payments lowered if your original agreement is not working in your favor.
We are former IRS attorneys, appeals officers, and auditors who help taxpayers with unpaid tax debts. We offer compassionate, individualized service at the most affordable rates.
If you are in a situation where you cannot pay your debt owing, call today for a free, confidential consultation. Our number is 713-909-4906.