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IRS Installment Agreement

Overdue w1040This article discusses what you need to know about an IRS Installment Agreement collection remedy when you or your business owe IRS more than $50,000.  If you or your business are experiencing financial hardship, resulting in inability to pay your federal tax liability, then one collection remedy option is to file a request for an IRS accepted Installment Agreement.  As with any other IRS collection remedy requested, by far the best procedural method to request IRS acceptance is through collection due process procedure.  To learn about IRS collection procedure and collection due process rights, read my other articles:  Final Notice Of Intent To Levy – How To Stop IRS From Levy, and IRS Collection Due Process rights, to the left under Practice Areas, Federal Tax Matters.

What Is An IRS Installment Agreement, And Is An Installment Agreement The Correct Collection Remedy To Pursue?

An installment agreement is a monthly payment arrangement over time to full pay your federal tax liability.  Any type of federal tax liability, and any type of taxpayer, may request IRS to accept an Installment Agreement.  IRS alone has discretion to accept or reject your request for a monthly Installment Agreement.   An Installment agreement is an appropriate collection remedy to pursue if you or your business cannot afford to full pay now, but can afford to full pay over time by monthly payments.  It would be foolish to request and get an accepted Installment Agreement at monthly payment amounts which could not be future paid.   Too often, IRS Collection Division employees fabricate a fake financial condition, like higher net monthly income than actually exists, then demand the taxpayer pay that fake monthly income by Installment Agreement, only to later have the taxpayer default the Installment Agreement.  If you or your business cannot afford to full pay over time, then offer in compromise, doubt as to collectibility would be a more appropriate collection remedy to pursue because if IRS accepted, an offer in compromise will fully settle your IRS tax liability for typically much less than the original balance owed.   If you or your business think an offer in compromise might be more appropriate, read my IRS Offer In Compromise discussion to the left under Practice Areas, Federal Tax Matters, then call me for a free telephone consultation if you owe more than $50,000.

Do I Need A Tax Lawyer?

If you or your business owe more than $50,000, then a qualified and experienced tax lawyer should be hired to prepare and prosecute an installment agreement request.  IRS often wrongly attempts to have too high a monthly payment amount, over too short a payment term.   If you or your business allow this IRS tactic by proceeding to an Installment Agreement, the consequences of a subsequent default will cause you or your business big IRS trouble.  With decades of experience, David C. Dodge, Tax Lawyer and C.P.A., knows how to effectively and aggressively fight for an IRS accepted installment agreement.  Call for a free telephone consultation if more than $50,000 is owed.  Toll Free:  (877) 895-2950.

How Do I File An IRS Request For An Installment Agreement?

For individuals seeking an IRS accepted installment agreement, I advise certified mail filing (to the address stated on form 9465 instructions):
{1} an executed form 9465, Installment Agreement Request (click upper left arrow after reviewing) IRS Form 9465; and
{2} an executed form 433-F, Collection Information Statement (click upper left arrow after reviewing). Form 433-F.

For a business entity seeking an IRS accepted installment agreement, I advise certified mail (to the address of the revenue officer working the case, or to the IRS address on the most recent letter addressing the unpaid liability) filing,
{1} an executed form 433-D, Installment Agreement (click upper left arrow after reviewing) IRS Form 433-D Installment Agreement, and
{2} an executed form 433-B, Collection Information Statement for Businesses (click upper left arrow after reviewing) Form 433-B Collection Information Statement for Businesses.

Other Issues You Must Know About An IRS Installment Agreement.

You Must Comply With All Federal Tax Law.  In order to file your request for an IRS Installment Agreement, all federal tax returns due must be filed.   If IRS has not filed {recorded in the County Recorder’s Office) a Notice of Federal Tax Lien,  IRS will so file a Notice of Federal Tax Lien when you request an Installment Agreement, or after an Installment Agreement is accepted.  It is possible to negotiate an Installment Agreement contract term that IRS will not file a lien, but usually IRS will refuse such a term.  If IRS accepts an Installment Agreement, you contractually agree to perfectly comply with all federal tax law thereafter while the Installment Agreement is pending, and “perfect” federal tax law compliance includes filing all future tax returns when due and paying all federal taxes when due.   If, after IRS accepts an Installment Agreement, you default by not complying with federal tax law or not paying any monthly installment, IRS will default the Installment Agreement and commence aggressive collection actions, and next time around an accepted Installment Agreement will be much more difficult to obtain.

IRS May Not Levy Your Income/Assets.  IRS is not permitted to levy (involuntarily taking) your assets and/or income, while your Installment Agreement:  {a} is pending for IRS consideration, {b} for 30 days after requested but rejected, and continuing during the pendency of an IRS administrative appeal if you file for an appeal within 30 days from rejection, {c} is in effect after IRS acceptance,  and {d} for 30 days following termination.

The Ten Year Collection Statute Expiration Date.  Generally, IRS has ten years from assessment to collect the tax liability owed.  This ten year period is tolled (stops counting) when an Installment Agreement is pending, when an Installment Agreement is in effect, 30 days after rejection and during a timely requested appeal, and 30 days after termination.

Other Issues.  Penalties and interest continue to accrue during an Installment Agreement.   During an Installment Agreement, IRS can demand you update your financial condition evidence, and IRS may later require higher monthly payments or a shorter term, but you can appeal any modification.  If your financial condition deteriorates after IRS accepted your Installment Agreement, you may apply for a lower payment, for a longer term, or other appropriate modifications.  If the Installment Agreement is accepted, you must pay a fee of $120.