Installment Agreements Tax Specialists in Fairfax, VA
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 $120 “user fee” for implementing an Installment Agreement, although if you agree to make the payments by direct debit from your bank account, the fee is reduced to $52.
If you owe more than $50,000, the IRS is likely to file a Notice of Federal Tax Lien even if you enter into an Installment Agreement and make the required payments. 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.
Contact us if you would like additional information on how to compute your minimum monthly Installment Agreement payment. The same calculation is used to determine whether you qualify for an Offer In Compromise.
WANT MORE INFORMATION?
See our article on 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.”
If you minimum monthly payments are insufficient to pay what you owe in full before the Statute of Limitation on Collection expires, you may qualify for a “Part Pay” Installment Agreement. See our article on Part Pay Installment Agreements for more information.