Is an installment agreement the right payment option to settle my tax debt?

It depends.  An installment agreement is essentially when the Internal Revenue Service (IRS) allows you to set up a payment plan to pay your tax bill.  This is a benefit to you because instead of having to pay your entire tax balance due in a single payment, you can spread the payment out over a period of time.  This time period is flexible based on the amount you can pay per month.  The minimum monthly payment is $25.  But the plan must call for payment of your tax bill in full before the statute of limitation on collecting the tax runs out.  In the case of taxes owed to the IRS, the statute of limitation is 10 years from the date the tax return is filed.

However, an installment agreement also has disadvantages to you as a taxpayer.  To set up an installment agreement, the IRS charges a fee as follows:

  1. $43 dollars if your income is below a pre-determined threshold,
  2. $52 if your installment payments will be made via an automated means, or
  3. $105 if your installment payments will be made via a payroll deduction or check.

While the fee may be fairly reasonable, the IRS also charges the taxpayer interest and penalties on the tax balance due until the balance is paid off.  Therefore, if you enter into an installment agreement, it is in your best interest to pay the balance off as quickly as you can afford.

You can apply for an installment agreement in several methods:

  1. Call the phone number on your tax bill,
  2. Apply online (but only if you owe no more than $25,000 in taxes), or
  3. Complete and mail to the IRS Form 9465 Installment Agreement Request.

If you owe more than $25,000, you must also complete and mail Form 433-F Collection Information Statement.  You have to complete the additional form if you owe more than $25,000 in taxes because the IRS wants to confirm you are in a financial position to pay your tax bill within a reasonable time.

Once you have submitted your application and the IRS has accepted the installment agreement, you must perform certain actions to be sure the IRS does not consider you in default on the agreement.  These actions include:

  1. Making your installment agreement payment monthly by the due date,
  2. Including your name, Social Security Number, contact information, and tax information with each of your payments, and
  3. Filing future tax returns on time and paying the balance of any additional taxes due.

Inclusion of the information noted in the second bullet above is for your benefit, to help make sure the IRS applies the payment against your tax balance rather than against someone else’s account by accident.

When you file additional federal tax returns each year, if you find that you again owe taxes to the IRS, you can contact the IRS to alter your current installment agreement to incorporate this new tax balance.

Do I need assistance from a tax attorney to set up an installment agreement with the IRS?

Completing the process to set up an installment agreement with the IRS is fairly simple.  However, you should not enter into an installment agreement until you speak with a tax attorney.  The IRS makes other payments options available to taxpayers, including an offer in compromise.  In an offer in compromise, you may actually be able to pay the IRS less than the full balance of your taxes due (whereas with an installment agreement you will pay more than the full balance due when you consider interest and penalties).  Therefore, you should consult with a tax professional about your specific situation before you make a decision.

By completing the short form at http://www.offerincompromiselawyer.com/Tax-Relief.php, you will provide the information necessary for a tax lawyer to start reviewing your situation.  As this review is 100% confidential and free of charge, you have nothing to lose by completing the form and getting help today to resolve your tax issue.