Using Installment Agreements to Relieve Your IRS Debt

For assistance negotiating Installment Agreements with the IRS, contact the professionals from Hutton Tax Solutions. Call and schedule a consultation today!

Understanding Installment Agreements

If you owe the Internal Revenue Service (IRS) money and cannot pay your taxes in full, an installment agreement may be the right choice for you. It is a payment plan that allows you to handle your tax debt over time. This arrangement can help relieve some of the financial burden associated with owing taxes and help you avoid penalties, such as late fees or interest charges. 

If you need help paying your taxes and are concerned about the IRS, negotiating an installment agreement can be a great option if you cannot make one large payment in one go. In this article, we will see how an IRS payment plan works and how it can help you resolve your IRS debt.

What Is an IRS Installment Agreement?

An IRS installment agreement allows the taxpayer to make regular payments towards their tax debt until it is paid in full rather than all at once. This type of agreement can help taxpayers manage their financial obligations in a way that fits their current budget while still satisfying IRS requirements.

Understanding the terms and conditions of an installment agreement before signing up for one is essential. Any missed payments or other agreement violations could result in penalties or even criminal charges like a Notice of Federal Tax Lien or an IRS levy action.

By assisting you in determining the option that works best for you, Hutton Tax Solutions’ highly trained lawyers can help ease the burden of existing agreement payments. A skilled attorney can guide you through any associated requirements and determine the optimal next steps in your tax/IRS debt resolution.

How Do IRS Installment Agreements Work?

The IRS has a predetermined due date for collecting unpaid taxes, often referred to as a Collection Statute Expiration Date (CSED). This date varies depending on the tax year it was assessed for. Once that date passes, no further action can be taken. 

If you are nearing the 10-year limit, you may face aggressive attempts to recover the money. The IRS may demand an impractical payment plan in its urgency to get the tax debt paid. You do not have to agree if that isn’t feasible for your current financial state.

Most proposed agreements with the IRS result from a formula used to determine your ability to pay. This calculation helps set up your disposable income for each month.

The IRS determines your monthly budget by identifying what allowances to make for the following ordinary expenditures:

  • Car payments
  • Food
  • Health insurance
  • House payments or rent
  • Life insurance
  • Vehicle costs, including fuel and maintenance 

They also use Form 433A to identify your assets like real estate, vehicles, and investments.

The IRS utilizes the information provided by taxpayers to calculate how much they can pay back. However, they may not always agree with what is stated in the form and can dispute certain expenses.

You need to be prepared for challenging negotiations with the IRS. If they find any of your expenses suspicious, you should be ready to explain them. A reputable tax attorney’s assistance can be instrumental in this process.

What Are IRS Payment Plan Options?

There are several options available for those who need help paying their taxes. Knowing your options and understanding the process can make getting back on track with your tax payments easier.

Depending on your available resources, you can consider a few different installment and payment plans to determine whether a short-term solution will work for you. In some situations, a longer-term solution with a lower minimum monthly payment amount may be required.

Short-Term Payment Plan

You can apply for a short-term payment plan to pay your taxes in 180 days or less.

If you opt for this plan, payment can be made electronically or by phone using the Electronic Federal Tax Payment System (EFTPS). You can also pay using the online payment agreement tool or via:

  • Credit card/bank account
  • Check 
  • Money order

As you are working to settle your tax obligations, you will be liable for incurring interest and applicable penalties until the entire tax debt is fully paid.

Long-Term Payment Plan

Long-term installment agreements are an efficient way of repaying a debt. You will cover the penalties and interest payments until your debt is fully paid. Minimum monthly payments over a set period make it much easier to manage this obligation. You can apply easily either online or over the phone.

Consulting with attorneys experienced with tax debts and other issues can help you figure out which type of payment plan would work for your case.

How to Make Payments to IRS Installments?

If you have the means to settle your remaining tax debt, you can do so by paying directly. This option is available for individuals and businesses and can be done electronically or by phone through EFTPS. Before using it, remember to enroll first.

A direct debit option eliminates any future penalties or interest that might be charged.

Does Installment Agreement Extend Statute Limitations?

The IRS has a 10-year limitation that commences from when you first owe money, not when you set up an installment plan. Therefore, an existing installment agreement does not extend the statute of limitations for debt collection.

When a tax debt becomes due is determined by a process known as assessment. Assessments usually occur in the following situations: 

  • There was an amount due on your tax bill that still needs to be paid. 
  • The IRS made an estimated debt on their books after you failed to file a return.
  • The IRS completes a tax return audit.

A knowledgeable tax attorney can prove beneficial in helping you decide how to address your unique scenario. They can also provide guidance regarding other steps you can take, such as the IRS Fresh Start Program to help you make a well-informed decision.

How Can an Attorney Help With IRS Issues?

Dealing with the IRS can be daunting, and having an experienced attorney by your side is essential to help you navigate the complexities of the tax system. An attorney can provide invaluable assistance regarding IRS issues, from helping you understand your rights and obligations under the law to ensuring that any disputes are resolved efficiently and promptly. 

By having an experienced attorney on your side, you will be able to ensure that all of your IRS matters are handled correctly and efficiently. For questions about negotiating an IRS back tax settlement, talk to an attorney at Hutton Tax Solutions. Contact us to schedule a free consultation today!