Uncle Sam is not in the credit business – at least not intentionally. Uncle Sam prefers that his debtors pay their bills in full, on time, all the time. But Uncle Sam realizes that sometimes personal situations make it difficult to honor your tax obligations. So if you owe so much to the IRS that you’re unable to clear your liability with a single large payment, Uncle Sam offers a payment option, known as the Installment Agreement. The Installment Agreement is based on what you can legitimately afford to render to the IRS each month while keeping up-to-date with your current tax obligations and covering your necessary living expenses.
First, the good news about Installment Agreements:
- Over time you can pay off your tax debt, including penalties and interest, through monthly payments.
- While the Installment Agreement is in place, providing you remain compliant with the terms, the IRS has to halt enforced collection activities, meaning that you’re not subjected to the stress and frustration of dealing with wage garnishment, bank levies, and seizure of other property.
If you’re considering an Installment Agreement with the IRS, call our tax boutique.
Why? Not knowing the IRS’s standard operating procedures can mean the probable rejection of your proposed payment plan, and forging ahead on your own could result in a quagmire of tax difficulties for you later on.
Here’s what transpires when you approach Uncle Sam about accepting monthly payments:
- You begin with a general idea of how much in monthly payments you can afford to make to the IRS. Your goal is to convince the IRS that you can afford to pay that much a month, but that is all you can afford a month. In other words, you’re dancing on a fine financial wire.
- You must do the math. Interest and penalties don’t stop attaching to your principal once you’ve entered into an Installment Agreement. This means that at the end of the year, you may owe more taxes than the original principal when you began making monthly payments.
- There is a time limit to pay off all your tax debt. Your proposed monthly payment must be sufficient to clear all principal, plus the accumulated penalties and interest, by the end of this time period.
- And as with all things IRS, for Installment Agreements, you must submit a form reporting, and documentation proving, your income and expenses. This step is crucial – and difficult to traverse. You must be aware of what expenses the IRS deems necessary and acceptable, and you must produce various financial statements as evidence of your monetary circumstances. Your records must prove your ability to pay a specific monthly amount, and no more than that amount. In other words, you need some discretionary funds in your monthly budget left over after payment for all basic living necessities. You’ll be using the discretionary funds for the tax payments.
Rejection of your Installment Agreement is possible based on any one of a number of reasons. For instance, if your form, including the calculations, is not accurate, or if your living expenses are not determined to be necessary, the IRS can refuse to accept your plan. If you are not compliant with all required IRS filings, the IRS will reject your plan. If you have defaulted on a previous Installment Agreement, the IRS can reject your plan. If you have failed to disclose all assets, the IRS can also promptly reject your proposed plan.
Remember: today’s technology allows the IRS to search out your assets through court records, through the state’s Recorder’s Office, through social networking photos, through online for-sale postings, through any number of other creative and unusual means. “Forgetting” that you own an asset and not reporting it can be grounds for rejection of your proposal to the IRS.
So establishing an Installment Agreement with the IRS requires patience, dedication, hard work, and a thorough knowledge of your rights as a taxpayer and expertise in predicting how the IRS will respond to the sometimes massive amounts of documentation required from you. At Law Offices of Christy Lee, P.C., our tax professionals will:
- Interview you regarding your financial circumstances, including your tax obligations, and review your correspondence with the IRS. We look for errors in IRS calculations regarding your tax debt and confirm that the amounts have been legitimately assessed.
- Work with you to determine a monthly payment amount which is doable for you and likely acceptable to the IRS. If your budget isn’t accommodating, we will help you search out unnecessary expenses, enabling you to fit the monthly payment to the IRS into your expenditures.
- Complete the IRS forms necessary to enter into an Installment Agreement and review and prepare the supporting documentation, including the redaction of unnecessary and potentially damaging data.
- Handle all communications between you and the IRS, so that your stress is alleviated, your rights as a taxpayer are assured, and no irrelevant financial information is passed along to the IRS needlessly.
- And counsel you concerning future record-keeping to lessen the risk of future noncompliance with the Internal Revenue Code.
At Law Offices of Christy Lee, P.C., we are trained to negotiate with the IRS on your behalf. We understand the IRS’s tactics when assessing your ability to pay off your tax debt. We can predict how the IRS will respond to a particular proposed payment plan under a predetermined set of circumstances. We know and can ensure your rights as a taxpayer. Let Law Offices of Christy Lee, P.C., help you achieve peace of mind while you clear your tax liability through an Installment Agreement with the IRS.