Updated: Sep 27
You can resolve your outstanding tax debt even if you owe the IRS $30,000 or more! If you cannot pay the bill in full at the time the tax is assessed there are 4 options available to you. Those options are:
I'll only be covering Installment Agreements in this post but if you're interested in learning about the others you can check them out here in this video, Your 4 Options to Resolve Your Tax Debt.
An installment agreement is essentially a payment plan that the IRS allows taxpayers to set up when they aren't able to pay their obligation in full but they can pay it over time. There are 3 types of installment agreements:
Partial pay agreement
Note: Setting up an installment agreement will allow you to break up your debt into payments that you can manage but be aware that while penalties won't keep adding up interest will.
Streamlined Installment Agreements
A streamlined installment agreement is the least intrusive arrangement to set up. This means that the taxpayer is not required to turn in any financial for the IRS to approve the request. If a taxpayer owes less than $50,000 and can pay in full with in 72 months the IRS will accept it.
This is why it is the easiest payment arrangement to set up and can be done on the phone or even online. According to the IRS approximately 80-90 percent of individual taxpayers with a balance due qualify to use the IRS’s Online Payment Agreement application.
This type of agreement is for taxpayer's who owe more than $50,000 and meet these criteria: have time remaining on the 10 year statute and can afford the monthly payments to pay in full.
Note: Learn how to avoid adding more time on to that 10 year statute here at 7 Deadly Sins That Give the IRS More Time to Collect From You
You will be required to fill out Form 433-A. When you are on this type of payment plan you can expect the IRS to be ALL up in your business until the debt is paid off and the 433-A gives them a window to look in your house. This form asks about all sources of income, even the employer! You'll also need to provide information on your assets like money (retirement accounts, Life Insurance, bank account balances along with account numbers), equity in home, and your vehicles. The IRS uses this information to determine you can cash out or sale these items to get their money.
Before they have you sell all of your prized possessions you have the opportunity to show how much you can afford to pay each month. The bottom of page 6 is where you enter in your allowed monthly expenses: housing, utilities, vehicle payments and operating costs, and other debts. If you remain tax compliant on current taxes and keep up with the terms of the installment agreement, the problem is resolved.
But what if your 433-A shows that you can't afford to pay the full amount of taxes owed and you aren't a good candidate for an Offer in Compromise? Don't panic! A partial pay agreement is just what you need.
Partial Pay Agreement
After filling out your 433-A you may discover that the payment you can afford to pay is quite a bit less than what the IRS would like for you to pay. Don't worry, you're not going to jail! Contrary to popular belief the IRS doesn't want to ruin your life, they just want their money. This is why they will work with you by setting up a partial pay agreement.
This agreement allows you to make payments until the IRS statute to collect expires. Using a partial pay agreement may prove to be a better option than even an offer in compromise! The IRS knows this so if you do have this type of arrangement set up they will require you to send in updated financial information every year or two to see if they can squeeze a little bit more money from you each month. The beauty of going this route is that you may end up paying much less than you owe but you can still avoid the IRS issuing a lien or levy on your property!
The main thing to remember is if you're willing to work with the IRS they are willing to work with you. They aren't turning down money to pay down tax debts anytime soon. If you don't want to work with the IRS yourself you don't have to. You have the right to representation and that's exactly what my team and I do. We step into the shoes of taxpayers and fight the IRS for them. Interested to see if we're a good fit to step in your shoes? Book your call at https://bookingbowens.as.me/taxrelief.
Which installment agreement do you think is the best one for taxpayers to choose? Let me know down in the comments and don't forget to subscribe, like, and share!
Timalyn S. Bowens EA is America's Favorite EA and Louisville's Tax Expert that will work hard to find a legal solution that is customized for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states.
When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.