If you are unable to pay your back tax in full, there are programs and options you can potentially qualify for to find relief. One of those options is an Installment Agreement (IA), which is a legally binding contract between you and the IRS that basically will switch the large amount of tax debt that you owe over to smaller, more manageable payments that you make over time.
There are a few different types of Installment Agreements available based on your individual financial qualifications. Don’t be intimidated by the government to accept an agreement or plan that isn’t the most beneficial for you – there are better options available and we can help you fight for one that works for YOU!
Requesting an Agreement
Before pursuing an Installment Agreement, your tax attorney should carefully review all your financial records and tax returns. Form 433-A and Form 9465 will both need to be completed for you, which will start the negotiation process between you and the government Once these forms are received, the IRS will respond within 30 days with your predicament.
Finding Relief is Possible
Upon receiving the IRS response, your tax attorney will discuss your options based on the IRS decision. You may qualify for:
- A reasonable installment agreement
- A reduction of your outstanding tax debt
- A penalty abatement program (removal of penalties and interest charges)
- Forgiveness of the entire tax debt due to financial hardship (through an OIC)
What is an Installment Agreement (or Payment Plan)?
At its most basic, an Installment Agreement is basically an agreement with the IRS to pay back the outstanding tax debt that you have over time, instead of all at once. These payments can be spaced out over years, and at a reasonable amount that you can afford, so that your quality of life isn’t significantly reduced as a result of becoming compliant again.
How Much Time Do I Have to Pay?
After determining which agreement will work best for you, you will have between 4 months and 10 years to pay off an outstanding tax debt. Full financial disclosure is important. The IRS may need you to sign an extension in lieu of the collection statute. Securing an IRS payment plan is dependent upon two things:
- The amount you owe, and
- How much you can afford to pay each month.
It is wise to have the help of a tax professional to enable you to clearly understand which payment plan will be most beneficial to you in the long term. There are a few other things that they will take into consideration when considering this, including:
- The level of monthly “disposable income” that you have coming in
- Any allowed living expenses that you may have
What are the Ways that I can Pay?
The government is fairly flexible in terms of the method of repayment, which will include:
- Automatically debit your bank account
- Mail your check
- Delivering your payment directly to the IRS office
- Request your employer to withhold the payment amount from your wages
Types of Agreements You Can Get
There are basically two different types of Installment Agreements, depending on how much money you owe:
1) Streamline Installment Agreement
If your tax debt is $25,000.00 or less including interest, penalties and fines, a tax debt settlement may be quickly reached. We can submit all of the necessary paperwork for you, and will make sure that everything is in place for a speedy resolution.
2) Long-Term Installment Agreement
If you owe more than $25,000.00 in combined liability from taxes, interest, penalties and fines, you may still qualify for an agreement. In addition to the normal Form 9456 Installment Agreement Request, your tax specialist will accurately complete and file a Collection Information Statement, Form 435.
What you will need before starting the process
If you have recently filed your tax return and were unable to pay, it is crucial to contact a tax attorney now. Even though you may not have received a notice from the IRS yet, it is wise to take proactive steps to prevent aggressive collection action.
To begin the process of negotiating an IA, please have the following ready:
- Social Security number or Tax ID number
- Income information
- Bank accounts, savings, retirement funds
- Outstanding debts
- Past tax returns
- Notices or Letters that you have received from the IRS
This will aid us in determining the payment amount you will be required to pay, and what way we can work things out for you.
How it Works - The Process that We Use
If you choose to hire a professional like us, we will start the IA process by:
1) Scheduling a detailed consultation with you to carefully review your needs.
You will be required to examine your financial information in depth to determine the amount you can afford to pay each month. It is imperative to have wise financial guidance at this stage. You always have the option to pay more, but set the monthly payment at an amount you are comfortable with. Never allow the IRS to press you into a payment plan you cannot afford. Let us negotiate something that works on your behalf.
2) Determining if you are able to qualify for relief and verifying the true amount of your tax debt.
If you have received a notice, check to see if the balance has been included. If not, we will contact the IRS to confirm the exact amount due which will include all interest, penalties and fines. The correct tax debt information is vital when we are attempting to determine which plan will work best for you.
3) Completing and filing a Form 9465 Installment Agreement Request.
The next step we will take is to file a Form 9456 request, which will star the process. This iw Your tax specialist may also use the Online Payment Agreement Application, but occasionally we have to battle with them over the phone. In this application, you will be asked to select which day of the month you would like to schedule your payment, between the 1st and 28th.