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Installment Agreements
If you owe more than $10,000 in tax liability to the IRS you may wish to seek representation from an Enrolled Agent to increase the certainty you get a reasonable IA payment that you can afford. Enrolled Agents are licensed directly by the IRS to represent taxpayers. Enrolled Agents become licensed by passing the Special Enrollment Examination, also known as the EA Exam and can practice throughout the United States. Types of Installment Agreements The main types of installment agreements are: Guaranteed Installment Agreements: If you owe $10,000 or less to the IRS, you are eligible for this type of IA, provided you meet the following criteria: * You have not filed your returns later than the due date or defaulted on your returns in the last five years. * All your returns are filed. * Your monthly installment payments will pay off the balance due (plus interest and penalties) in 36 months or less. * You have had no other installment agreements in the last five years. * You agree to file your returns and pay your taxes on time in future. The IRS will not file a federal tax lien under a guaranteed installment agreement. This is helpful as tax liens have a negative impact on your credit rating. Streamlined Installment Agreements: You are eligible for a streamlined installment agreement if your balance is less than $25,000, and you agree to pay off the balance due (plus interest and penalties) in 60 months or less. Under a Streamlined Installment Agreement the IRS is not likely to file a federal tax lien. Like a Guaranteed Installment Agreement a taxpayer must have all tax returns filed prior to the agreement and must agree to file tax returns and pay taxes on time in the future. Partial Payment Installment Agreements: This type of a payment plan is suitable if your minimum payments due do not meet the criteria set by the guaranteed and streamlined installment agreements. A Partial Payment Installment Agreement can be used regardless of the amount owed. In this case, your monthly payment is based on what you can afford after deducting your living expenses. The downsides of this plan are that the IRS is more likely to file a federal tax lien and you will be asked to fill out Form 433-F to report your assets, income, and expenses and provide bank statements and possibly other documentation for the past three months. Non-Streamlined Installment Agreements: If your balance due is more than $25,000, you have to negotiate your installment agreement with the IRS. You also opt for a non-streamlined installment agreement if your repayment term is longer than 60 months, or you fail to meet the criteria associated with other installment agreement plans. In this case you are required to provide Form 433-F or Form 433-A along with documentation and there is a high likelihood the IRS will file a federal tax lien. How to Set up an Installment Agreement with the IRS The IRS encourages taxpayers to pay what they owe as early as possible. For individuals or businesses that cannot resolve their tax burden within the desired period, setting up an installment agreement with the IRS is the best option. Setting up an installment agreement requires you to: * Have previously filed all your tax returns. * Disclose all assets including cash and bank accounts. * Not be able to borrow the amount due to the IRS from other sources, like a second home mortgage. * Not have adequate equity in your IRA or 401K to pay the balance due. The IRS officials will ask you for a complete personal or business financial statement, and will calculate your monthly payments by taking into account "allowable" monthly expenses. IRS Installment Agreement Defaults So, you have defaulted on your installment agreement payments to the IRS. What happens now? It is very important to know that the IRS must send you a notice of default before it starts collection activity. This notice is called "Notice of Intent to Levy!!! You Defaulted on Your Installment Agreement." After the IRS sends this notice, you have 30 days to file an appeal to renegotiate the installment agreement. If you file the appeal within 30 days, the IRS cannot take any collection action or enforce the default until your appeal hearing is completed. This is mandated by law - Internal Revenue Code 6159(b) (5) - and by the Internal Revenue Manual (IRM 5.14.11.9). Renegotiating your installment agreement protects your bank accounts and other assets from IRS collection agents, till you negotiate a whole new plan for repayment of your liabilities. If you are still unable to repay your IRS debt, other options available to you include Offer in Compromise (OIC), bankruptcy or being placed in IRS uncollectable status. Installment Agreement Benefits An installment agreement gives you, the taxpayer, adequate time to pay off your taxes in an orderly manner. As long as you are able to pay off what is owed by you, IRS collection agents would never bother you. Eligible individuals can get a six-month extension for filing their tax returns and possibly paying their tax bills if they are under certain financial hardships. These are all highlighted, along with eligibility factors in Form 9465. Article Directory: http://www.articledashboard.com Fast Forward Academy is a leading publisher of enrolled agent exam study guides, enrolled agent exam review courses and continuing education for all tax professionals. Information on the company including free access to an online question bank for the EA exam can be found on their website at fastforwardacademy.com |
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