If you are facing unpaid IRS back taxes, then the IRS installment agreement may be an option to provide some tax relief. The IRS installment agreement is considered the next best tax solution for those taxpayers that do not qualify for an Offer in Compromise. In fact, it is the most common method used by delinquent taxpayers to resolve payment of IRS back taxes. The IRS installment agreement gives you the option of paying your IRS back taxes over time by arranging an affordable monthly payment plan. For that reason, it is most often called an IRS payment plan or IRS monthly payment agreement. IRS payment plans are established based upon your income, reasonable monthly expenses, and the amount you owe to the IRS in back taxes.

The IRS payment plan can also be used for tax liabilities that are not yet delinquent. If you are filing your current IRS tax return and realize you cannot pay the entire amount due, you may file IRS Form 9465 ”Installment Agreement Request” and send it along with your IRS tax return. You will receive written notification indicating whether your terms for an installment agreement have been accepted or if they need to be modified.

An IRS payment plan is easier to obtain if a taxpayer owes the IRS less than $25,000 in taxes, and can remit all of the back taxes due within a five year time frame. If a taxpayer owes more than $25,000 in IRS taxes, the IRS will take this level of tax debt much more seriously and require additional information. The $25,000 guideline includes the actual tax liability, IRS penalties, and any IRS interest charges that have accumulated. Completion of Form 433F “Collection Information Statement” will need to be included along with Form 9465 “Installment Agreement Request” when requesting approval for an IRS installment agreement. The IRS will send written notification of approval or rejection.

Taxpayers who have had an installment plan agreement with the IRS within the past five years may not qualify for a new IRS payment plan. If a taxpayer is currently remitting installment payments to the IRS and realizes their financial situation has changed, making them unable to pay current year IRS taxes in full, it may be possible to modify or restructure the IRS payment plan. This modification of the IRS payment plan would then include the additional tax amounts owed into one IRS monthly payment plan. If a taxpayer finds themselves in this situation, professional IRS tax debt help is advised. Approval of a modified IRS installment agreement can be critical to relieving the current financial strain. Additionally, Form 433F “Collection Information Statement” will need to be completed to further outline to the IRS the new financial hardship circumstances.

Once an IRS installment agreement is granted, it is critical that a taxpayer never miss a payment. If this occurs, the taxpayer is deemed to be in default and the IRS payment plan may be revoked. The IRS may also then return to their aggressive collection efforts, such as the filing of a lien and/or an IRS levy action. Typically, the IRS does not enforce collection actions while an installment agreement is being considered, nor for 30 days after a request for an installment agreement has been rejected.

Why use IRS professionals when setting up a payment plan with the IRS? As a delinquent taxpayer, dealing with the IRS on your own can be a difficult and stressful experience. There are specific and complicated formulas that the IRS uses to calculate the amount of the monthly tax installment payment. It is not surprising that the IRS seeks expeditious collection of the back taxes in full. By insuring the monthly payment amount is as high as possible, the IRS is able to secure payment of the back taxes quickly, even if it means placing the taxpayer in a financial hardship situation. For that reason, it is often wise to retain the services of professional IRS tax advisors to handle your IRS payment plan. IRS tax specialists are knowledgeable in this area, will negotiate the IRS installment payment amount on your behalf, and will fight for your rights as a taxpayer. Taxpayers often have to live with the installment payments to the IRS for a long period of time, and defaulting on installment payments to the IRS poses an even bigger threat to a healthy financial future. It is crucial the installment agreement payment amount is affordable. IRS tax professionals are invaluable in helping to secure a reasonable installment agreement payment amount. Our affiliated tax advisors are ready to assist you with an IRS payment plan.