When a tax debtor is incapable of meeting his or her tax obligations, alternative mechanisms for satisfying a debtor’s tax obligations must be considered. A number of alternatives exist and have been approved time and again by the IRS, including Offers in Compromise and installment agreements. That said, the availability of these alternatives to paying a tax liability immediately and in full is based in part upon the amount of taxes owed to the IRS, as well as the taxpayer’s history with the IRS.
IRS Payment Plans over 50K
The first basic distinction relates to whether the taxpayer owes more than $50,000 in taxes. If so, then the taxpayer must engage in negotiations with the IRS in order to obtain an installment agreement. Bear in mind that negotiations do not guarantee that the IRS will actually grant an installment agreement. If the IRS determines that the taxpayer will be less likely to meet his or her obligations when places on an installment agreement plan, the IRS may decline to do so. Though there may be administrative and judicial recourse for this denial, it is preferable to achieve the intended result at the initial application level, and an attorney may be required to do so. Additionally, if the tax debtor owes more than $50,000, he or she will be required to provide the IRS with detailed financial information as required by Form 433-F. This requirement is normally waived for those that owe $50,000 or less, but such information must be provided where the outstanding amount is above $50,000.
Although these streamlined or guaranteed installment agreements are not available to those tax debtors that owe more than $50,000 to the IRS, that does not preclude the possibility that such a tax debtor can avail him or herself of the installment agreement option. That said there are a number of additional requirements that must be met in order for such a tax debtor to be extended an installment agreement offer:
- Taxpayers must be completely compliant in terms of filing all tax returns currently due;
- All delinquent returns must be filed; and
- The installment agreement must provide for payment in full before the statute of limitations on collection has run
Internal Revenue Service, Internal Revenue Manual, available at https://www.irs.gov/irm.
These and other nuances of the installment agreement criteria of the IRS may make the difference between a tax debtor’s ability to obtain an installment agreement and the denial of such an application. For more information, contact an experienced tax attorney who can assist you with the nuances of installment agreement requests.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.