Installment
Agreement
  
Installment Agreement
You
do not have to pay your tax liability when you file your tax return.
In your tax return, you can request to pay your taxes in
installments you can afford by requesting an Installment Agreement.
Installment agreements generally require equal monthly payments.
The amount of an installment payment will be based on the amount owed
and on the taxpayer’s ability to pay that amount within the time
legally available for the
IRS
to collect. By law, the
IRS
has the authority to collect outstanding federal taxes for ten years
from the date of assessment. For taxpayers that enter into an
installment agreement, the
IRS
may require a signed waiver to extend the time
IRS
can collect.
As
a condition of an installment agreement, any refund due in a future year
will be applied against the amount owed. Therefore, taxpayers may not
get all of their refund if they owe certain past-due amounts, such as
federal tax, state tax, a student loan, or child support. The
IRS
will automatically apply the refund to the taxes owed. If the
refund does not take care of the tax debt; then the installment
agreement continues until all of the terms are met.
An installment agreement is more costly than paying all the all
the taxes owed now. Penalties and interest continue to be charged on the
unpaid portion of the debt throughout the duration of an installment
agreement.
Installment
payments may be made by Direct Debits – electronic transfers from a
checking account or Payroll Deduction – deductions that an employer
takes from wages or salary. Installment
agreement payments can also be made by electronic funds transfer (www.eftps.gov
or www.officialpayments.com.
The
IRS
charges a user fee of $43 to set up the installment agreement. It is
possible for an installment agreement to be reinstated if the agreement
defaults. Also, installment agreements may be restructured to include
additional amounts owed in one agreement. Reinstating or restructuring
an existing installment agreement will cost an additional $24 user fee.
Installment
Agreements may be requested on Form 9465 and Form 433F to the address on
the bill.
Unfortunately,
the
IRS
can be expected to want to file a Notice of Tax Lien (filed in the
Country public records) when an Installment Agreement is Executed.
The
IRS
will not take an enforced collection action (i.e., levy against personal
or real property) while an installment agreement request is being
considered, or While an agreement is in
effect, for 30 days after a request for an agreement has been rejected,
and for any period while a timely appeal of the rejection or termination
is being evaluated by the
IRS
.
Throughout
the term of an installment agreement, payments must be made on
time. If payments cannot be made due to a change in financial condition,
taxpayers should contact the
IRS
immediately. Failure to make timely payments will usually
default the agreement. A defaulted installment agreement could
subject a taxpayer’s account to enforced collection action and
potentially have a negative effect on a taxpayer’s credit standing.
In
accordance with the law, installment agreement taxpayers receive an
annual statement from the
IRS
. The statement provides the amount owed at the beginning of the
statement period, the payments (credits) posted to account(s), any fees
or assessments, and the ending balance. Currently, the annual statement
is sent each year in July.
|
