An Installment Agreement is a payment plan with the IRS. There is a standard full pay Installment Agreement, Streamline Installment Agreement and a Partial Pay Installment Agreement. Installment Agreements may be used for a variety of reasons. Sometimes the balance due is relatively small and you have the ability to pay but just cannot pay the balance in one payment. A small monthly payment plan may be appropriate. The smaller or Streamline Installment Agreements are used when the tax due is $50,000 or less.
The IRS will want to see that you are now in current compliance with IRS regulations and procedures. This means they want to know that you are not creating new tax liabilities. The IRS will want to see that you are having adequate withholdings from your paycheck or that you are making regular estimated tax payments. The IRS will put a hold on their collection activity against you as long as you are complying with the terms of the Installment Agreement. You should also know that interest and penalties will continue to accrue until the past due balances are paid in full.
If you owe more than $50,000, then the IRS will perform a much more detailed analysis of your income and expenses to determine what you can afford to pay on a monthly basis. This process can be shocking and stressful for taxpayers. The IRS will only allow certain allowable expenses as determined by the IRS. This frequently does not match what your real life expenses are on a monthly basis. I spend a lot of time with taxpayers working on their financial statements to make sure they are getting the full benefit of the IRS allowable expenses. This helps you significantly reduce your monthly payments so that you can continue to meet your other financial obligations.
In some situations, your income is not sufficient to pay what you owe in full. You may be able to make monthly payments but there is not enough time to get the past due taxes paid in full before they expire. In that situation, some of the taxes may simply expire and become uncollectible.
The IRS will typically file Federal Tax Liens against you when you have a balance due. The IRS should release the liens as they get paid. I can frequently have the IRS withdraw the liens and have them removed from your credit reports. This can help improve your credit rating and reduce problems with employers and/or other businesses with which you do business.
Please contact me at 813.872.8787 to find out how I can help you fix your tax problem.