Taxes: Payment Agreement

Payment Agreement / Installment Agreement

Below are commonly asked questions and answers to establishing an Installment Agreement with the IRS:

What if I can't pay my taxes?  In the event that you are unable to pay your taxes in full, don't despair as you may have the option to establish an Installment Agreement. An Installment Agreement is a monthly payment plan with the IRS.  The amount of your payment depends on a number of different factors such as the amount of your back taxes, the number of months for the agreement, and your financial situation.   

How much of a payment?  The IRS has certain guidelines for installment agreements and wants taxpayers to pay their taxes in full as soon as possible.   Your payment will depend on how much you owe.  

  • If your tax debt is is less than $25,000 the IRS requires less information and disclosure from a taxpayer in setting up an installment agreement, as long as the proposed payment satisfies their internal guidelines.  These types of installment agreements are often referred to as "streamlined installment agreements".
  • If your tax debt is more than $25,000 the IRS requires more disclosure from a taxpayer.  In such a case, a taxpayer should be cooperative, but should be careful not to give inaccurate information and to be aware of the IRS tables and guidelines for expenses.  Failure to provide accurate financial information could result in a high payment that a taxpayer cannot realistically afford and could cause the taxpayer to default on their installment agreement and go right back into collections. 

What if I ignore my tax bill?  The IRS has special departments and individuals who specialize in collecting back taxes. At first the IRS will send reminder notices and will place phone calls, but if the notices go unanswered the IRS collection efforts will become serious.  The IRS has very broad collection powers and can issue bank levies and wage garnishments in effort to collect back taxes.  Therefore, it is best to be proactive with your situation to avoid such collection activity by establishing a protective installment agreement.  

What should I be aware of once on an installment agreement?   After your installment agreement has been established you will receive specific payment instructions and it is important to make your payments on time each month.   Additionally although you an installment agreement will give you time to repay your taxes the sooner you pay them off the less that any related penalties and interest will accrue.  Also, the IRS may issues a Notice of Federal Tax Lien and will keep future tax refunds until your tax debt is paid off.  Last, you will need to remain current with your tax filings to ensure that you don't have this problem in the future.  

Want to Learn More?  Elk Grove and Sacramento tax attorney Michael Johnson has worked with hundreds of taxpayers and has successfully established installment agreements with the IRS.  If you would like to speak to an attorney about your situation complete the contact form.