What is an IRS installment agreement? How much will the IRS want each month to pay back my taxes? As a tax attorney, these are common questions I am asked when an individual or business owes back taxes to the IRS and is looking at paying such taxes through an installment agreement or payment plan. The article an video below have been prepared by a Denver tax attorney at The McGuire Law Firm to provide information regarding an IRS installment agreement.
What is an installment agreement with the IRS?
An installment agreement with the IRS is an agreement whereby a taxpayer will make a monthly payment each month to eventually satisfy their IRS tax debt. The payment can be made by mailing a check, paying via phone or other automatic payment options.
What forms may I need to complete?
If you owe 1040 individual income taxes, you may have to complete Form 433A or 433F. If you own a business and the business owes taxes, you will need to complete 433B.
Do penalties and interest continue to accrue when I am on an IRS installment agreement?
Yes, penalties and interest continue to accrue. The failure to pay penalty is cut in half to .25% per month as opposed to .5% per month when an agreement is finalized though. This penalty will max out at 25%. Interest continues to accrue until the debt is paid in full at the current interest amount.
Can the IRS levy me when I am on an installment agreement?
No, there is a hold on enforcement as long as you are complying with the installment agreement terms, which will include making the monthly payment and timely paying all future taxes and filing all tax returns. Thus, if you are making your monthly payment per the payment plan arrangement, timely filing all applicable tax returns and timely paying all taxes, the IRS will not levy your bank account, garnish wages, seize assets or other types of collection action.
Can the IRS still file a tax lien if I am on an installment agreement?
Yes, the IRS can still file a Notice of Federal Tax Lien if you have established an installment agreement. Although, formalizing an installment agreement can in some circumstances prevent the IRS from filing a federal tax lien, the IRS can still determine that the filing of a tax lien is in the best interest of the government.
Does an IRS installment agreement release my IRS tax lien?
No. Formalizing an installment agreement with the IRS will not cause your tax lien to be released. If you continue to make payments and pay off the tax debt, the IRS will release the tax lien or tax liens upon the debt being satisfied.
What if I cannot make my IRS installment agreement payment?
It is probably best to contact the IRS and advise them that the payment cannot be made. You may be granted a grace period or the ability to adjust the payment amount. If your overall circumstances have changed, you may even be able to settle your tax debt with an offer in compromise. I have assisted clients where their circumstances changed and after being on an IRS installment agreement, they became a candidate for a tax settlement with the IRS offer in compromise unit.
If you owe taxes to the IRS, speak with a Denver tax attorney at The McGuire Law Firm regarding your options to resolve such debt. A tax attorney can assist you with establishing an installment agreement with the IRS or analyzing your ability to settle your tax debt. The McGuire Law Firm offers a free consultation to all potential clients.