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If you cannot pay all that you currently owe for prior year taxes and do not qualify for an offer in compromise, an IRS installment agreement may be your next best option. Payment Plans allow you to pay IRS debt in full in smaller, more manageable amounts, usually in equal monthly payments. The amount of your installment payment will be based on the amount you owe and your ability to pay the liability within the time available to the IRS to collect tax debt from you, also known as CSED (Collection Statute Expiration Date). A tax settlement attorney can help you to set up an installment agreement with the IRS. You should be aware that while you are making payments on your tax debt through an Installment Agreement, the IRS continues to charge interest and penalties on the unpaid portion of that debt. Another cost associated with an Installment Agreement is the initial setup fee of $105 charged by the IRS. The IRS uses a complicated formula to set their terms and guidelines, which favor the government’s agenda to collect the total amount owed as quickly as possible. The IRS feels they are being very generous to allow back taxes to be paid over time and underestimating this fact can be dangerous. Many try to set up their own installment agreement but due to inexperience or intimidation they fail to negotiate a payment plan that preserves their livelihood. These payment plans are then doomed for default and those who fail to make a payment are dropped quickly into collections, which means that levies will begin to be issued.
Even if you agree to the Installment Agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make a final payment. However, the IRS cannot levy against your property (1) while your request for a Payment Agreement is under consideration, (2) while your agreement is in effect, (3) for 30 days after your request for an agreement has been rejected, or (4) for any period while an appeal of the rejection is being evaluated by the IRS.
Partial Payment Installment Agreement: Though programs such as the Offer in Compromise have received tremendous attention through the media and tax relief firms offering ‘pennies on the dollar’ settlements, often times one of the most impactful solutions is a partial payment plan, where-in we structure a shortened IRS payment plan that expires long before the tax debt is paid in full. The reasons to qualify for this type of solution are numerous, and if applied for correctly, can save the average taxpayer thousands of dollars in tax debt and end the stressful collection process quickly.