IRS Installment Agreement | Installment Agreement Form | Tax Installment Agreement

One of the main functions of the IRS is to assess and collect all federal income taxes due. The IRS has substantial authority and power that was given to it by Congress to carry out its goals. With these powers and the substantial financial resources that have been assigned, the IRS is essentially the world?s largest and most powerful collection agency.

If bankruptcy or an offer in compromise is not an option, a taxpayer should consider an installment agreement. When trying to establish an installment agreement, the taxpayer must have reasonable negotiating skills. The IRS wants to collect the entire balance due as soon as possible, while the taxpayer is in need of a payment that works within their budget and that does not cripple them financially.

Often the taxpayer gets a monthly payment that is greater than what they can afford. This can result in a default under the agreement. If this occurs, the IRS will restart the collection process all over again. Hence, the taxpayer needs to make sure that they get an affordable installment agreement established upfront. The assistance of a tax professional can greatly improve the taxpayer?s chances of getting an affordable agreement.

The advantage to the installment agreement is that it will put an end to any collection efforts that the IRS was undertaking. This includes tax liens, levies, garnishments, and collection calls. But interest and penalties will continue to accrue on any unpaid balance throughout the entire installment agreement period.

As you go through the installment agreement process, you must remember that this is a contract between you and the IRS. The IRS certainly expects you to keep up your end of the bargain and make your payments on a timely basis.

Just make sure that before you instigate an installment agreement, you make sure that you are current on all tax filings. The IRS will make this a condition of the installment agreement.

By aggressively negotiating with the IRS and working diligently, most taxpayers with back tax issues can reach an installment agreement. They may need the assistance of a tax attorney or a CPA to get it done, but the goal is to get an installment agreement that works within your financial budget.

Why Should I File My Tax Return as Soon as Possible?

There are two advantages to filing as soon as possible:

• Generally, if a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).
• Self-employed persons who do not file a return will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration.

What If I Owe More Than I Can Pay?

Even if a taxpayer doesn’t have enough money to pay, returns should be filed to avoid further penalties for failure to file. The IRS will assist in finding a solution to the problem.

The IRS has streamlined its policies to offer alternative account resolutions if a taxpayer cannot pay in full with the return:

• The IRS will help to set up an installment agreement when the situation warrants. Installment payments allow taxpayers to pay the tax debt over time.
• The IRS will consider whether an offer in compromise is an appropriate solution.

What If I Don’t File Voluntarily?

The IRS is taking enforcement steps for those who repeatedly choose not to comply with the law. IRS employees will prepare returns when taxpayers do not file. The returns prepared by the IRS might not give credit for deductions and exemptions a taxpayer may be entitled to receive. Bills will be sent to those taxpayers for the tax due, plus penalties and interest.

People who repeatedly don’t comply with the law are subject to additional enforcement measures.

How Can I Avoid Owing Money on Next Year’s Return?

Many people don’t file tax returns because they don’t have enough money to pay the tax they owe. They find out after completing their return that their withholding or Estimated Tax payments do not equal their tax liability.

To help avoid this situation, the IRS can advise taxpayers how to ask an employer to withhold enough tax from their pay. For any income that is not subject to withholding, the IRS can provide information necessary to make quarterly payments to cover any amount to be owed.

Changes in financial circumstances could have an impact on taxes. For example, an increase in income, divorce, or selling an asset, may require adjustments to withholding or estimated payments.

By taking these steps, taxpayers will be better able to meet their tax obligations and avoid tax day surprises.

Will I Go to Jail?

A long-standing practice of the IRS has been not to recommend criminal prosecution of individuals for failure to file tax returns, provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from the IRS concerning taxes is not a notice that a taxpayer is under criminal investigation.

The IRS helps to get people back into the system as part of its long-term plan to improve voluntary tax compliance. The IRS wants to get people back into the system, not prosecute ordinary people who made a mistake. However, flagrant cases involving criminal violations of tax laws will continue to be investigated.