In such tough times, many taxpayers who do not qualify for an offer in compromise go the route of paying their IRS tax debt with an IRS payment plan. It may seem like this is of great benefit to the taxpayer (due to the difficulties of having to pay a lump sum of tax debt), but it is actually most beneficial to the IRS. When a payment plan is in force, interest still accrues on the tax debt creating a windfall to the IRS. To pay for the privilege of paying off this back tax in payments, taxpayers will have to pay much more for the tax debt, due to all the accrued interest and applicable IRS tax penalties.
If you absolutely cannot pay your taxes in full, there are a few payment options for tax relief if you do not qualify for an offer in compromise. The IRS has increasingly made getting on a payment plan more accessible. However, some difficulties still exist making it a great idea to consult a reputable tax lawyer to negotiate the monthly payment amount.
Before applying to resolve your IRS tax problems, know which type of agreement is right for you. There are four types of payment plans the IRS offers that you should discuss with all IRS tax attorneys:
- Guaranteed installment agreement. Applies when your IRS tax debt due is $10,000 or less. In this case, the IRS is required to agree to an installment plan.
- Streamlined installment agreement. Applies when your tax debt due is $25,000 or less and you agree to pay it off in 60 months or less or as of March 7, 2012 with the Fresh Start Initiative, your tax debt is $50,000 and you agree to pay it off in 72 months or less.
- Partial payment installment agreement. Applies where a taxpayer cannot afford the payments for the guaranteed or streamlined agreements. In this case, the monthly payment is based upon what you can afford, taking into consideration certain necessary living expenses.
- Non-streamlined installment agreement. Applies where a taxpayer owes more than $50,000, when a longer repayment term is needed or when a taxpayer does not qualify for either a streamlined or guaranteed payment plan.
Remember, to negotiate a successful installment agreement, get up to speed with the basics:
- All required tax returns must be filed before negotiations can even begin.
- All future refunds will be applied to your tax debt.
- If your IRS tax debt exceeds $50,000, a complete financial statement will be needed (Form 433-F, Collection Information Statement).
- The IRS generally will not enforce collection activity, (1) while an installment agreement is being considered, (2) while an agreement is in place, (3) for 30 days after rejection or (4) during the appeals process.
- To avoid default, keep your account in good standing and pay the minimum amount due.
- The agreement may not be enforced if all required tax returns are not timely filed.
- If you are in danger of defaulting on the installment agreement be sure to contact your tax attorney immediately to engage in another solution with the IRS.
A vigilant San Diego tax lawyer can assist you in resolving your federal tax debt and will also provide IRS debt help to ensure that you remain compliant with your taxes. The San Diego Tax Attorneys at Delia Law have many years of IRS resolution experience and will aggressively represent you before the IRS. Please call for a no-cost tax attorney consultation at (619) 639-3336. We are conveniently located at 12707 High Bluff Drive, Suite 200 in San Diego. We look forward to helping you.
This blog post is not intended as legal advice and should be considered general information only.