When a taxpayer fails to pay the amount of taxes owed, the result can be a large and unexpected bill from the IRS. As a way to help individuals cope with tax debt, the IRS allows taxpayers to make smaller payments over time so that the burden is spread out and easier to manage. The individual tax installment will vary in amount for each taxpayer and each debt owed, but in ever case, the installments are include interest payments as well. For this reason, it is more economical to pay your tax debt as fast as possible to avoid paying even more with accrued interest over the life of the installments.
Negotiating Unpaid Taxes and Installment Agreements
If you have a debt with an IRS and you wish to enter into a tax installment payment plan, you will have to complete a collection information statement. The information that needs to be included on the statement includes:
- statements of assets (bank accounts and assets)
- disclosure of income
- expenses incurred
- available home equity
- available credit (credit cards)
- property owned and value
- cars owned and their value
- information about employment if self-employed
- wages, salaries, rental income, food/clothing/misc. expenses
- health care costs
- anything related to finances of the taxpayer
Once the IRS has the collection information statement and supporting documentation, a determination will be made about whether the IRS will allow an installment plan to be put in place. In certain cases where the total tax debt owed is under $25,000, the IRS may waive the requirement for completion of the collection information statement. It really depends of the scope of the tax problem and the size of the debt.
Determining the Payment Amounts for Installment Agreements
The key piece of information for many taxpayers is getting the final amount of their monthly tax installment under their agreement with the IRS. There is no magic formula used by the IRS when arriving at the number – but suffice to say, it is a balancing act between what the individual owed, what they earn as income, and the size of their total debt. Higher incomes and high debt combinations will have higher installment amounts that smaller debts with relatively low income. If a taxpayer believes that the installment amount is too high or was determined in error, an argument can be made to the IRS and they may be willing to reconsider.
Tax Attorney Help for Installment Agreement Negotiations
In many cases, seeking legal help from a qualified tax attorney can greatly increase your chances of achieving favorable terms of payment with the IRS. You may have multiple options and choices to make when deciding how to handle you debt, and an attorney who can explain the benefits and drawbacks of each can make a dramatic impact on the overall outcome of your case.
