Mopsick Carrere, LLP | Attorneys at Law
Mopsick Carrere, LLP | Attorneys at Law

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IRS Installment Agreement: An Option for IRS Tax Relief

| Dec 11, 2013 | Firm News

Taxpayers unable to pay their IRS tax debts in full in a single payment have a number of available options. One of those options is to establish a payment plan with the IRS, which is commonly referred to as an installment agreement, or IA. An installment agreement allows taxpayers to make monthly payments to repay tax debts over time rather than paying all at once.

The IRS will evaluate a taxpayer’s ability to pay on an installment agreement by analyzing gross income, allowable expenses, and equity in assets. The IRS collects this information using a Collection Information Statement completed by the taxpayer. The IRS keeps taxpayers honest by requiring them to sign the Collection Information Statement under penalty of perjury and by requiring supporting documents such as income statements, bank statements and proof of expenses, etc. The IRS will also review their internal records to confirm all required tax returns are filed. The IRS generally won’t take any enforced collection actions, like issuing levies on income or assets, while an installment agreement is formally under consideration, while an installment agreement is in place, and during the appeal of rejected or terminated installment agreements.

The IRS typically only has ten years form the time a tax is assessed to collect the tax interest and penalties. Once this time expires, which is known as the Collection Statute Expiration Date (CSED), the IRS can no longer take any action to collect on the tax debt. While a taxpayer is on an installment agreement with the IRS, the CSED clock continues to run. In some cases, a taxpayer will not repay tax debts in full before the CSED expires. An installment agreement that does not full pay a tax debt before it expires is called a partial pay installment agreement.

A streamlined installment agreement is a simplified version of the installment agreement which allows taxpayers to establish an agreement without disclosing financial information. Streamlined installment agreements are only available when taxpayers total tax debt is below specified thresholds and the tax debt can be paid in full within a set period of time.

The IRS’s goal is to collect as much back tax debt as quickly as possible. Taxpayers owing debt should always address the problem by considering all options, including an installment agreement. Ignoring a tax problem will only compound the problem and cost more money in the long run.