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IRS Installment Agreements

(aka IRS Payment Plans, IRS Monthly Payments)

What are Installment Agreements?

Installment Agreements, or monthly payments in a payment plan, may be the way to go if you can't pay the full amount you owe the IRS or if you don't qualify for an Offer in Compromise. The IRS would prefer taxpayers pay what they owe sooner and at one time, but for many, this is not an option. Usually, an Installment Agreement will allow you to pay your outstanding taxes in smaller, more manageable payments.

Some Important Things to Consider

  • Installment Agreements usually require equal monthly payments to the IRS.
  • The IRS considers your ability to pay before considering how much you owe when determining your monthly payment amount
  • Borrowing money from other sources to pay what you owe in some cases may be your best bet - these types of agreements can be levied with IRS interest and penalties. Bank loan or credit card cash advances may have less interest.
  • Interest may be deductible on borrowing sources such as second mortgage and home equity lines of credit.
  • To be granted an installment agreement, you can't have cash in checking, savings, money market, or brokerage accounts that would be adequate to pay the debt.

How Installment Agreements Work

  • First, to qualify for an IRS payment plan, all tax returns that are due must first be filed.
  • Next, the IRS will determine monthly expenses they will allow you (matched with actual monthly expenses). The payment to the IRS will be the difference between your monthly income and your allowable monthly expenses.

Beware that the IRS may file a Notice of Federal Tax Lien against you, though they can't seize your property or your wages while an Installment Agreement request is pending, in effect, or for 30 days after an Installment Agreement request has been rejected. The IRS will also ask for a personal financial statement and if you own a business, a business financial statement will be requested.

  • You will also need to ensure that all tax returns have been filed and that you disclose all assets that you own. The assets also must include all cash and bank accounts.
  • Once you start with monthly Installment Agreement payments, it will continue until the outstanding tax liability is paid off.

At the law office of Steven N. Klitzner, we have the knowledge and the experience necessary to assist you with setting up installment agreements. Dealing with tax problems can be one of the most stressful times of anyone's life; don’t handle it alone - you need a tax lawyer who specializes in tax law and has experience in helping people get rid of their IRS problems.

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