Installment Agreements

When a taxpayer cannot afford to pay the balance owed in full, or when a taxpayer is not eligible for an Offer in Compromise, an Installment Agreement is the best course of action to take to protect secured assets and establish a payment plan based on your ability to pay. An Installment Agreement involves a financial analysis of gross monthly income on the one hand, against necessary living expenses on the other. With regard to necessary living expenses, the IRS will only allow those expenses necessary to support yourself and your family independently. For example, the IRS will permit the reasonable costs of food, clothing, medical insurance and copays, reasonable rent or mortgage for your area, etc. They will not permit luxurious costs in determining your disposable income. The IRS considers reasonable costs by number of people in a household and the county you live in, among many other considerations. There are many ways to arrive at disposable income; however, without hiring a professional you may miss valuable opportunities to get the most economically feasible outcome. We are privy to the latest developments affecting IRS guidelines and are able to navigate the financial analysis to promote the taxpayer’s interest in obtaining a manageable resolution so you can stay in good standing. Left to its own devices, the IRS will often demand payments that benefit the IRS’s interest in collecting funds immediately, rather than payments taxpayers can maintain over the life of the delinquency.

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The IRS has ten (10) years to collect taxes owed for a given tax year, once tax is assessed. This means your tax liabilities eventually expire. Partial Pay Installment Agreements are formal installment agreements with the IRS whereby the IRS makes the determination to accept a monthly payment amount that will not satisfy the liability owed within the guideline of 60 months, nor that of the statute of limitations on the debt owed. Such agreements function similarly to Offers in Compromise because a taxpayer may avoid paying the full liability before it expires. Partial Pay Installment Agreements are difficult to establish, but ultimately have less stringent terms than an Offer and do not require the inclusion of asset values calculated over the statutory collections period.