If you find it difficult to pay delinquent taxes right away, but have the assets and or income to pay the amount you owe over time, an IRS Installment Agreement may be the right option for you. An Installment Agreement allows you to pay your tax debt in smaller, more manageable amounts. Compared to the IRS’ other programs, it is relatively easy to obtain an Installment Agreement, especially if you owe less than $25,000. In order to enter into an Installment Agreement, you need to determine whether you have money left over after meeting your monthly living expenses to make installment payments. If you set up an Installment Agreement plan, you may choose either direct debit or payroll deduction as the payment options.
There are various types of Installment Agreements that allow you pay your back taxes over a period of time. Standard Installment Agreements, Streamlined Installment Agreements and Partial Pay Installment Agreements are some of the more common types. If you owe the IRS less than $25,000 a Streamlined Installment Agreement is most likely the answer for you. This type typically involves less work than other Installment Agreements and therefore will cost less to obtain. In order to obtain an Installment Agreement, you need to have filed all prior year’s tax returns and remain in compliance during the time with which you are under the agreement.
A Partial Pay Installment Agreement may be the right choice for those who owe more than they are able to pay for the remaining statute of collections based upon their monthly disposable income. In order to obtain a standard or Partial Pay Installment Agreement you will most likely need to disclose your financial information. The IRS wants to know your actual monthly income and expenses as well as assets in order to determine your ability to pay. Your tax representative will assist you in filling out a Statement of Financial Affairs in order to create a financial picture for the IRS. The IRS will approve an agreement if they are satisfied with the information set forth in the Statement of Financial Affairs and 3 month’s statements to backup of the information submitted.
Keep in mind that if you submit the information in a manner that does not paint the proper picture to the IRS, you will probably get a less than satisfactory result and find it difficult to resubmit the information again.
Make sure you call the Tax Resolution Institute when you are ready to proceed with an Installment Agreement. We can get you back on the road to compliance.
About Peter Y. Stephan
Peter Y. Stephan, executive director of the Tax Resolution Institute, has been helping people resolve large, complex payroll tax problems and personal income tax problems for over 25 years. Peter has written a book "The Ultimate Tax Resolution Guide" and speaks on Tax Resolution topics frequently.