Advantages and Disadvantages of IRS Installment Agreements

What happens when you receive an eye-popping bill from the IRS which you know you will be unable to pay? There are a number of different programs and options which taxpayers can leverage to find some degree of relief, and the IRS Installment Agreement is one of the most commonly utilized.
An Installment Agreement allows a taxpayer to pay off their tax debt in monthly increments over a specific period of time, rather than forcing them to pay it all up front. Generally, it is meant for taxpayers who know they will be able to pay off the debt in time, but do not have all the money up front. For those who will never be able to pay off their tax debt, other options like the IRS Offer-in-Compromise may be a better route.
There are several key advantages and disadvantages to utilizing an Installment Agreement to pay off your tax bill which we have detailed below:
The major advantage of an Installment Agreement is the one we mentioned above: taxpayers can take up to 72 months to pay off their tax debt rather than having to pay it in one lump sum. Additionally, an individual who is completely up to date on their tax filings and owes less $50,000 ($25,000 for businesses) to the IRS is automatically eligible to apply for an Installment Agreement. If you owe less than $10,000 and fulfill certain other criteria, your application cannot be turned down by the IRS. The application process is relatively simple and pain free with the assistance of a skilled tax attorney, and as soon as your application is submitted, the IRS will cease all collection activities against you, including bank levies, wage garnishments, and property seizures. Even if your plan is rejected, you will have 30 days before the IRS begins collections again. If the application is accepted and as long as you stay up to date on all your payments and future tax obligations, then the IRS will not pursue any further collection actions throughout the life of your Installment Agreement.
The biggest disadvantage is that a taxpayer’s penalties and interest for unpaid taxes will continue to accrue monthly throughout the life of the Installment Agreement on whatever debt remains. This can add up to between 8-10% interest every year, meaning you will end up paying the IRS significantly more than you originally owed. Additionally, all future tax refunds will be applied to your payment plan. If you owe more than $50,000 in taxes, penalties, and interest as an individual taxpayer, you may still be able to negotiate an Installment Agreement, but it will be a much more complex process involving disclosures of a large amount of financial information.
To learn whether an IRS Installment Agreement could benefit you, be sure to consult with a professional tax attorney who understands the system and can advise you on the best course of action when you cannot pay your tax bill. Contact the law office of Weisberg Kainen Mark, PL today and let’s discuss your options!

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Weisberg Kainen Mark, PL

As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.

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