If you can't
pay the full amount you owe the IRS,
and you don't presently qualify for an
Offer in Compromise, an Installment Agreement
may be your next best option. In some
cases, an Installment Agreement will
allow you to pay the tax liability in
smaller, more manageable amounts.
Installment Agreements generally require
equal monthly payments. The amount of
your monthly payment will be based more
on your ability to pay than on the amount
you owe. You should know, however, that
an Installment Agreement can be more
expensive than borrowing money from other
sources to pay what you owe. This is
because the IRS charges interest and
penalties even during the period of the
Installment Agreement. The interest rate
on a bank loan, or even a cash advance
on your credit card, may be less than
the combination of penalties and interest
charged by the IRS. Also, if you can
get a second mortgage or home equity
line of credit the interest may be deductible,
whereas interest and penalties that you
pay to the IRS are not deductible. The
IRS charges a $43 "user fee" for implementing
an Installment Agreement.
Even though you enter into an Installment
Agreement and you make the required payments,
the IRS may still file a Notice of Federal
Tax Lien against you. However, the IRS
can't levy (seize) your property or your
wages --
- while a request for an Installment
Agreement is pending;
- while an Installment Agreement is
in effect;
- for 30 days after an Installment
Agreement request has been rejected;
or
- while an appeal of the rejection
of the Installment Agreement request
is being appealed.
Complete a Client
Data Form so we can estimate your
minimum monthly Installment Agreement
payment. (The same information can
be used to determine whether you qualify
for an Offer In Compromise.)
WANT MORE INFORMATION?
Negotiating
Installment Agreements, published
by the Maryland Society of Accountants
in "The Freestate Accountant" as part
of Mr. Haynes' series "Dealing with
the IRS Collection Division."
IRS
Tax Topics -- "What to Do If You Can't
Pay Your Taxes."
