What if I Already Have a Payment Plan With the Irs and I Owe Again

If you can pay your debt over time, an installment plan may be the right solution.

The well-nigh widely used method for paying an erstwhile IRS debt is the monthly installment agreement, or IA. If you owe $50,000 or less, you should exist able to get an installment payment plan for 72 months just by asking for it. If you owe more than $50,000, yous volition have to negotiate with the IRS to get one and provide fiscal data. As part of its Fresh Start programme, the IRS recently adopted new rules making it easier to obtain an installment understanding. The threshold for qualifying for an installment agreement without having to provide financial information was increased from $25,000 to the current $l,000 corporeality and the timeline for paying was increased to 72 months from 60 months.

Y'all must exist current on this year's taxation returns. If IRS computers evidence that you haven't filed all past due revenue enhancement returns, you will not be eligible for an IA. Likewise, if yous are self-employed, you must exist current on your quarterly estimated revenue enhancement payments for the current year. Finally, if you have employees, you must be electric current on payroll tax deposits and Form 941 filings to get an IA.

But don't presume that a payment plan is your all-time selection -- there are definite drawbacks. The biggest is that interest and penalties continue to accrue while you nonetheless owe. Combined with penalties, the interest charge per unit is ofttimes 8% to x% per twelvemonth. It's possible to pay for years and owe more than than when you started.

Example:

Rodney and Rebecca owe the IRS $forty,000 in dorsum taxes. They enter into a $300 monthly payment plan at a time when interest and penalties full 10% a year, adding an boosted $iv,000 to their balance. Twelve months' worth of $300 payments add up to only $three,600, then they volition owe $40,400 at the end of the year ($40,000 minus $3,600 paid plus $iv,000 in involvement).

In addition, if you take no leftover cash later on living expenses, you lot're not in a position to negotiate a payment plan. At this point, your best bet is either submitting an offer in compromise, asking for a suspension of drove activities, or filing for Chapter 7 defalcation.

If yous owe $50,000 or less, y'all can apply for your installment understanding online at the IRS website.

Negotiating a Monthly Payment

If y'all owe more than than $50,000 or tin can't pay the corporeality y'all owe in 6 years or less, your request for an IA begins with an IRS collector'southward analyzing your Collection Information Statement on Form 433-A. The collector uses the information on the class to make up one's mind the corporeality you can pay. Payment amounts are at the discretion of the IRS. If you lot bargain with eight different collectors, you might end up with eight different IAs!

Still, here are some strategies for negotiating an installment plan:

• Suggest a payment programme you lot can live with. Exercise this when you paw the completed Grade 433-A to the collector.
• Offer to pay at least the corporeality of your income minus your necessary living expenses. This is the greenbacks you have left over every month later on paying for the necessities of life. Don't, withal, promise to pay more than than you tin can afford just to become your plan canonical. Promising the IRS more than you can deliver is a serious fault; once an IA is canonical, the IRS makes it difficult for you to renegotiate information technology.
• Give a first payment when yous suggest the agreement -- and continue making monthly payments even if the IRS hasn't all the same approved your IA. Making voluntary payments demonstrates your practiced faith and creates a runway tape. For example, if you lot pay $200 a calendar month for three months before your IA is approved, the collector may be inclined to believe that this is an appropriate corporeality.

If the IRS grants an installment plan, it may have several months to notify y'all in writing.

Making Monthly Payments

Until you receive written discover of approving, ship payments to your local service center using the payment slips and bar-coded envelopes provided. If you don't want the IRS to know where you banking concern, utilize a money club or cashier's check from another bank.

You lot have two other options for making payments once your IA is approved:

• Apply a directly payroll deduction. Request a payroll deduction on Form 2159, Payroll Deduction Agreement. Your employer must agree to send payments to the IRS each month using the IRS'south payment slips.
• Use a direct debit. Have your depository financial institution automatically debit your checking account each month and send a payment to the IRS. Every bit long every bit you go on the account open, this is the most foolproof style to make sure you don't miss a payment and risk having the agreement revoked.

If the IRS Refuses Your Installment Understanding Proposal

If the IRS won't hold to installment payments, information technology is for one of three reasons:

• Your living expenses are not all considered necessary. The IRS may deem your expenses improvident. For example, if you lot take hefty credit menu payments, make whatever charitable contributions, or ship your kids to individual schoolhouse, expect the IRS to balk. Although reasonable people would disagree on what is necessary and what is improvident, the IRS is rather stingy here.
• Information yous provided on your Collection Information Statement, Class 433-A, is incomplete or untruthful. The IRS may recall you are hiding property or income. For example, if public records show your name on real estate or motor vehicles that you didn't listing, or the IRS received W-2 or 1099 forms showing more than income than you listed, be prepared to explain.
• You defaulted on a prior IA. While this doesn't automatically disqualify yous from a new IA, information technology tin can cause your new proposal to be met with skepticism.

If your IA proposal is first rejected, you can keep negotiating. Ask to speak to the collector'due south managing director. Just making this request is sometimes plenty to soften the collector upwardly. If you lot become nowhere with the manager, you can go over her head -- anybody at the IRS has a boss. You lot can complain to her immediate boss, then the collections co-operative chief, then the district director. Squeaky wheels sometimes do go greased. Again, just talking about going up the ladder may crusade a change in attitude at the lower rungs and get y'all a off-white payment plan.

When the IRS Can Revoke an Installment Agreement

Once you receive approval of your IA, yous and the IRS are leap past the terms of the understanding, unless any of the following are true:

• You fail to file your tax returns or pay taxes that arose after the IA was entered into. Although IRS computers do not continue to review your finances, they practise monitor you for filing future returns and making promised payments.
• Y'all miss a payment. Under the terms of all IAs, payments not made in full, and on time, can crusade the IA to be revoked immediately. In practice, the IRS usually waits 30 to 60 days before revocation -- at to the lowest degree on the beginning missed payment. You lot are entitled to a warning or a chance to reinstate the agreement.
• Your financial condition changes significantly -- either for the better or worse. The IRS usually won't find out about this unless you tell. The IRS may review your situation every twelvemonth or two, nonetheless, and require you to submit a new Form 433-A in club to keep your IA.
• The IRS discovers that you provided inaccurate or incomplete information as role of the negotiation. For instance, y'all may have omitted to mention certain valuable assets.

For more data on how to bargain with the IRS to work out a payment program, see Stand Upwardly to the IRS, by Frederick West. Daily (Nolo).

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Source: https://www.nolo.com/legal-encyclopedia/irs-installment-payment-plans-29563.html