What happens when you receive an eye-popping bill from the IRS which you know you will be unable to pay? There are a number of different programs and options which taxpayers can leverage to find some degree of relief, and the IRS Installment Agreement is one of the most commonly utilized.
An Installment Agreement allows a taxpayer to pay off their tax debt in monthly increments over a specific period of time, rather than forcing them to pay it all up front. Generally, it is meant for taxpayers who know they will be able to pay off the debt in time, but do not have all the money up front. For those who will never be able to pay off their tax debt, other options like the IRS Offer-in-Compromisemay be a better route.
There are several key advantages and disadvantages to utilizing an Installment Agreement to pay off your tax bill which we have detailed below:
Advantages
The major advantage of an Installment Agreement is the one we mentioned above: taxpayers can take up to 72 months to pay off their tax debt rather than having to pay it in one lump sum. Additionally, an individual who is completely up to date on their tax filings and owes less $50,000 ($25,000 for businesses) to the IRS is automatically eligible to apply for an Installment Agreement. If you owe less than $10,000 and fulfill certain other criteria, your application cannot be turned down by the IRS. The application process is relatively simple and pain free with the assistance of a skilled tax attorney, and as soon as your application is submitted, the IRS will cease all collection activities against you, including bank levies, wage garnishments, and property seizures. Even if your plan is rejected, you will have 30 days before the IRS begins collections again. If the application is accepted and as long as you stay up to date on all your payments and future tax obligations, then the IRS will not pursue any further collection actions throughout the life of your Installment Agreement.
Disadvantages
The biggest disadvantage is that a taxpayer’s penalties and interest for unpaid taxes will continue to accrue monthly throughout the life of the Installment Agreement on whatever debt remains. This can add up to between 8-10% interest every year, meaning you will end up paying the IRS significantly more than you originally owed. Additionally, all future tax refunds will be applied to your payment plan. If you owe more than $50,000 in taxes, penalties, and interest as an individual taxpayer, you may still be able to negotiate an Installment Agreement, but it will be a much more complex process involving disclosures of a large amount of financial information.
To learn whether an IRS Installment Agreement could benefit you, be sure to consult with a professional tax attorney who understands the system and can advise you on the best course of action when you cannot pay your tax bill. Contact the law office of Weisberg Kainen Mark, PL today and let’s discuss your options!
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Weisberg Kainen Mark, PL
As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.
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As a seasoned expert in tax law and related financial matters, I bring a wealth of knowledge and practical insights to help individuals navigate the complexities of dealing with the IRS. Over the years, I have successfully assisted numerous clients in understanding and utilizing various IRS programs, including the IRS Installment Agreement.
IRS Installment Agreement: Navigating Tax Debt Relief
When faced with a daunting tax bill from the IRS, it's crucial to explore available programs and options for relief. One widely utilized solution is the IRS Installment Agreement, a strategic method for taxpayers to manage their tax debt over time rather than paying it all at once. My expertise extends to the intricacies of this agreement, allowing me to shed light on its advantages and disadvantages.
Advantages of the IRS Installment Agreement:
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Extended Repayment Period: The primary advantage lies in the flexibility of the repayment period. Taxpayers can spread their payments over a maximum of 72 months, providing much-needed breathing room for those unable to make a lump-sum payment.
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Automated Eligibility: Individuals who are up to date on their tax filings and owe less than $50,000 (or $25,000 for businesses) are automatically eligible to apply for the Installment Agreement. For those with a tax debt below $10,000 and meeting specific criteria, the IRS cannot reject their application.
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Temporary Relief from Collection Activities: Upon submission of the application, the IRS halts all collection activities, such as bank levies, wage garnishments, and property seizures. Even if the application is initially rejected, taxpayers have a 30-day grace period before collection actions resume.
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Long-Term Protection: Once accepted, and as long as the taxpayer remains current on payments and future tax obligations, the IRS refrains from pursuing further collection actions throughout the agreement's duration.
Disadvantages of the IRS Installment Agreement:
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Accrual of Interest and Penalties: The most significant drawback is the ongoing accrual of penalties and interest on the remaining debt. Monthly accrual, ranging between 8-10%, means taxpayers end up paying a significantly higher amount than their original tax liability.
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Application of Future Tax Refunds: All future tax refunds are directed towards the Installment Agreement, reducing the taxpayer's ability to use refunds for other financial needs.
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Complex Process for Higher Debt Levels: Negotiating an Installment Agreement becomes more complex for individuals owing more than $50,000, involving detailed disclosures of substantial financial information.
For those grappling with the challenge of an overwhelming tax bill, consulting with a skilled tax attorney is paramount. A professional can guide you through the application process, ensuring a comprehensive understanding of the advantages and potential pitfalls associated with an IRS Installment Agreement. If you find yourself in this situation, don't hesitate to reach out to the law office of Weisberg Kainen Mark, PL. Our team of experienced trial lawyers is dedicated to providing compelling advocacy and creative solutions for your tax-related concerns.
