Installment Ageements

Installment Agreements

Installment agreements (IA's) are a widely used tool for tax collection. They are generally used when you are unable to pay the tax but you can pay enough each month to pay off the tax in a reasonable amount of time - generally no more than five years. Unfortunately, I have seen IA’s in cases where the amount paid monthly does not even cover the accruing interest. If this is true in your case, you should consider an Offer In Compromise.

If you have just filed your return and find that you are unable to pay the entire balance, you can request an installment agreement using Form 9465 or by phone to IRS collection personnel. If you owe no other tax, the balance is less than $25,000, and you can pay it off in five years or less, the agreement is generally granted without the need for providing any financial information. You tell them how much you can pay and on what day of the month you will be making the payment.

If you do not meet the requirements for an automatic installment agreement, the IRS will likely require you to provide some information regarding your monthly income and expenses. In most cases they will require you to complete Form 433-A (and Form 433-B if you are self-employed).

Often times, an IA will only be offered to you if you also sign an agreement to extend the statute of limitations for collection of the tax. If you are asked to do this, please seek a professional experienced in these situations, sometimes I advise to sign statute extensions, but most of the time it is the wrong thing to do. If you get backed into a corner, tell them you wish to seek representation. If they refuse, ask to speak to their Group Manager or supervisor.

An installment agreement requires that you pay a $43 fee up front and $24 each time you default. They will subtract it from your first payment If you fail to file or pay timely in the future or fail to make estimated tax payments if you are self-employed, the IA will automatically default. You will have to start the process all over again.

If the amount you can pay is not enough to pay off the liability in the time remaining on the statute of limitations for collections, plus five years, the IRS CANNOT compel you to enter into an installment agreement or sign a statute extension.

Our office is ready, willing and able to advise you or to assist you in entering into an IA or filing an Offer in Compromise. For additional information, please call 915-581-1040.