IRS & State Tax News, Updates, Opinion, Guidance, and More» partial payment installment agreement

Income Tax Payment Plans for Individuals Who Can’t Pay in Full

Debra Dragon — Tue, 06 Apr 2010 12:58:20 +0000

In an ideal world when it comes time to file your income tax return you would break even or if you are lucky receive a tax return. That is not the case for all individuals and as is often the case a tax bill is due that you are not able to pay in full immediately. This can result in a lot of stress for the person owing the IRS. Fortunately there are options available to individuals who owe taxes but do not have the resources to pay in full. You may qualify for an income tax payment plan if you can prove you have adequate income or assets available to repay your tax bill in monthly installment payments. Filing your tax return is important to avoid late penalties, therefore if you know you are going to owe the IRS but do not have the money to pay immediately, you can fill out an installment agreement form and submit it with your tax return. People owing less than $25,000 generally find it relatively easy to obtain an installment plan agreement. Here we look at some of the options available to you if you are unable to pay your tax bill in full.

Guaranteed Installment Agreement

The most common type of installment agreement (IA), the Guaranteed IA is ideal for taxpayers who owe less than $10,000. To qualify you must have filed and paid any taxes due on time in the past five years and not have any current IA’s with the IRS. You must agree to pay the balance within three years and not have filed bankruptcy or have any other payment arrangement made with the IRS. The process includes completing Form 9465 and calculating a monthly payment by dividing the amount owed including interest and penalties and dividing that amount by 30 months. You then sign and date the application (if not filing online) and submit to the appropriate IRS address. Include any fees applicable with your application.

Streamlined Installment Agreement

This IA is used by individuals who owe more than $10,000 but less than $25,000. The qualifications are the same as listed in the Guaranteed IA with the only difference being the amount owed and the length of time needed to repay the tax bill. The Streamlines IA allows for 5 years versus 3 to repay the balance. The process is similar to that of the Guaranteed IA except you will determine you monthly payment based on 50 months versus 30 months.

Partial Payment Installment Agreement

The Partial Payment IA (PPIA) is an option for individuals who reach an agreement with the IRS to repay only part of the tax bill owed. If you are unable to meet the requirements necessary to repay the tax bill in full, the IRS may agree to a PPIA. If you make the required payments per the agreement, the IRS will not pursue collection efforts. They will however ask to see your financial records every two years to determine if you should pay more or terminate the agreement. You must complete and submit Forms 9465 and 433-A when applying for a PPIA. Include with these forms a letter requesting the PPIA as well as 3 months of income and expense documentation.

The summary information provided here can give you an idea of what options are available to you when you face a tax bill that you are unable to pay in full. It is recommended whenever you owe the IRS and wish to apply for an installment agreement, that you consult a tax professional. A person with the experience and training in tax laws can help you avoid making mistakes that could end up costing you more money in the long run.

Federal Tax Levy: Steps to Resolution with the IRS

Manny Davis — Mon, 29 Jun 2009 22:21:28 +0000

Every year, thousands of letters are sent out letting taxpayers know that the Internal Revenue Service means business. These letters (CP 90/CP 297), in consideration are often referred as an IRS Intent to Levy. A Federal Intent to Levy means that the IRS is going to try to recover or collect back taxes in a more coercive manner. This forceful collection method translates into the IRS either taking a good portion of your paycheck (referred to as Wage Garnishment) every month or seizing part of all of your bank account (called a bank account levy).

With regards to an IRS bank account levy, the IRS will typically seize whatever is needed for the repayment of your back taxes or unpaid taxes. They will begin by notifying your bank and having your bank hold or freeze funds for twenty-one days. After 21 days, your bank will send the funds to the Feds. Therefore, if you have received any type of notice from your bank or the IRS about your bank account being levied it is in your best interests to immediately deal with the situation before it’s too late. You will need to pursue a Federal Tax Levy Release and it most cases, a professional knows the forms and procedures to follow.

With a Wage Levy or IRS Wage Garnishment, the IRS will send notice of their intention to taking a part of your paycheck to your employer. Your employer MUST comply with the IRS under federal Law and make deductions from your wages as necessary. Strong professionals, like our firm’s partners, will in most cases be able to release wage garnishment in three to five days.

To release any levy, you or your professional will need to complete various forms. However, before anything is done you must be in compliance with the IRS. That means, that all tax returns that you have outstanding must be filed with the IRS before anything. Therefore, you need to know what years, if any, you did not file and make sure to complete the necessary tax forms.

Contact the IRS to see if you are in compliance (make sure to not disclose financial accounts or bank accounts etc as again the IRS will take advantage of every opportunity to seize your funds). An advantage of a professional here is he or she can call the IRS and shield you from questions the IRS agents are trained to ask. Knowing the limits here is important.
If you are are not in compliance, file the appropriate tax returns or have your IRS professional do them. In order to further penalties and interest, fax those returns to to the IRS so you can immediately get into compliance with the IRS.
Once you’re in “compliance” with the IRS, the next step is to figure out a form of settling IRS taxes owed. Settlement can be paying less than you owe or just pertain to an IRS Payment Plan, such as an IRS Installment Agreement, whereby you obtain an agreement with the IRS that you will pay them over time instead of all at once. Settlement mechanisms, where you pay less than you owe, can also be pursued depending on where you stand financially. These “settle for less” methods pertain to a Partial Payment Installment Agreement (PPIA), an Offer In Compromise, getting declared Uncollectible and so on.
In conjunction with Step 3 above, you will need to work with your tax professional or fill out form 433F (if your situation is being dealt with by the IRS Automated Collection System) or form 433A if you are dealing with a field agent. Form 433 is your Collection Information Statement. Form 433 will detailed all your assets, income, liabilities, etc.

If you’ve been notified by the IRS, do something about it. It means the IRS has started their notorious automated process of collection and they will not subside until your back taxes are paid or you have an “agreement” of some type (discussed above) to repay them. If you have been informed by the IRS of a tax levy, have had your bank account garnished or your wages, start by signing up for a free tax analysis by using the “get quote” form on the right. Our partners will call you, diagnose your situation, make recommendations and let you know the cost of utilizing our services at no obligation or cost to you. Our services are structured so that our services only make sense financially – i.e. we will save you more money and headache then if you tried to handle the situation on your own.

Can’t Pay Taxes? Set Up an Installment Agreement

Manny Davis — Sat, 20 Jun 2009 01:25:03 +0000

So you can’t afford to pay your taxes right now? Its okay; the IRS has options for you. This is probably a more common occurrence than you actually think. The IRS literally handles thousands and thousands of taxpayers each year that cannot pay what they owe. You can be assured that the IRS will have a method available to you in order to stay in good standing with them, even if you can’t pay in full or even at all. All you need to do is make the appropriate filing with them.

What is an Installment Agreement?

An installment agreement is an agreement between the IRS and the taxpayer that allows the taxpayer to pay back the taxes owed in monthly increments until the tax owed, plus interest has been paid off. An installment agreement is fairly easy to apply for. The good thing about an installment agreement is that once a taxpayer enters into this agreement the IRS will stop or will not charge any additional penalties on the taxes owed as long as payments are made on time and in the monthly required amount. It is best to setup an installment agreement at the time you know you cannot afford the taxes owed but you can still setup at anytime. This agreement is also a great way to remove or prevent the IRS from placing a lien and stops the IRS from enforcing a levy. It is important to make the required monthly payments because the IRS can then take tax collection actions against you if they choose.

Applying for an Installment Agreement

There are three different ways to apply for an installment agreement. It doesn’t matter which you choose they will all accomplish the same thing, just some are quicker than others.

Complete the Installment Agreement Request Form: IRS Form 9465
File on the internet at the following address: Online Payment Agreement Application
Over the phone by calling 1-800-829-1040. They will not set it up completely, but they will give you some guidance and them mail you forms afterward or tell you where to get on the internet.

If You Don’t Qualify for an Installment Agreement

If you do not qualify for an installment agreement it is because the IRS believes you will not be able to make the monthly payments or they believe you making the filing to stall collections or one of various other reasons the IRS can come up with. In that case you can ask if you can qualify for a partial payment installment agreement that will allow you to make lower monthly payments than those required with regular installment agreement. It is a good idea to talk with a tax professional if you can’t qualify because they can figure out the best method for you to resolve your tax problem with the IRS and ensure the IRS accepts it.