Before we consider the different types of installment agreements issued by IRS, it helps to understand the circumstances that can lead to the issuing of said agreements by this all powerful enforcement agency. IRS has legal capacity to force taxpayers to meet their obligations in filing tax returns timeously and accurately.
Monthly Payment Schedule (Tax Debts)
If you find yourself financially unable to pay your tax debt immediately, you can make monthly payments through an Installment Agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.
IRS has various recovery methods at its disposal to enforce tax defaulters to settle their outstanding tax debts, one of them being the issuing of Installment Agreements. In terms of the agreement, payment of debt in reasonable installments over an agreed period between IRS and the defaulter commences. The maximum installment period is 72 months, and can include penalties and interest, which increase over time in the event of delays in settling tax debts.
The Types of Installment Agreements
Installment Agreements exist in a variety of disguises; we expand further as we look at:
- Guaranteed Installment Agreement – This agreement has built-in guarantees as long as you meet IRS requirements, and meet your obligations. It applies to defaulters with tax debts in excess of $10k, and has a minimum amount payable over an agreed period.
- Partial Payment Installment Agreement – Here, the taxpayer pays less than the total amount owed over an agreed period. When paying, taxpayers must complete a Collection Information Statement using Form 433-F, which deals with reporting of income and living expenses, with full disclosure. Financial reviews are mandatory in person with IRS every second year.
- Non-Streamlined Installment Agreement – This covers taxpayers in debt to IRS for more than $25k, with manageable monthly payments agreed with the federal agency. Collection Information Statement, Form 433-F must accompany payment.
- Direct Debit Installment Agreement – This arrangement permits direct debiting for debt payment from the payee’s bank account where the liability is $25k or less.
- Verified Financial Installment Agreement: This agreement is for taxpayers owing more than $25k tax debt, and unwilling to pay via direct debit. This category of Installment Agreement involves a lot of paperwork.
Failure to Pay, or Missing Installment Agreement Payment
Failing to pay, or missing a monthly installment will result in IRS issuing notice number CP523. This notice informs of IRS’s intent to terminate your installment agreement and seize (levy) your assets, after defaulting on an agreement. Moreover, it creates a negative impression at IRS, as you have failed to comply with the terms of the agreement. It can lead to further financial difficulties.
Act Responsibly to Impending Delays
If you face difficulties relating to tax debt recoveries through any of the Installment Agreement types, use a registered tax consultant to negotiate with IRS on your behalf. It is inadvisable to ignore the problem and will it away, because the tax debts will remain, and even increase and IRS will not let go.
Do you owe more than $10,000 in back taxes? Protect yourself. Protect your business. Contact IRS Solver for a consultation.