February 27, 2020

Installment Agreements

Stated simply an installment agreement is a contract entered into with the IRS whereby you agree to pay your tax obligations over an extended period of time.

If your income tax liability is $25,000 or less (not counting interest and penalties), the IRS will most likely grant you up to a 5 year (60 month) payment plan. Note that interest will continue to accrue on the unpaid balance, but penalties will not. While you are paying on your installment agreement, you must remain in compliance by filing all income tax returns as they come due and by paying all taxes as they come due.

If you fail to pay an installment under your plan, the IRS can cancel the plan, although you can apply to have your installment plan reinstated.

If your income tax liability is more than $25,000, you are still eligible for an installment agreement, but before the IRS will approve your agreement, you will need to fill out and submit a documents called a “Collection Information Statement.” This statement, known as a Form 433-A is a disclosure statement that reveals to the IRS details about your assets and income. The danger here is that if your Installment Agreement is rejected or if you fail to comply, the IRS has specific information about where to go to seize your assets. You can look at a Form 433-A by clicking on the link.

The 433-A form also helps the IRS to calculate how much you must pay under your installment agreement. The 433-A form contains a space for a budget. Unfortunately, you do not get to choose the figures on your budget. Instead, the IRS has published a schedule of permitted expenses, based on your family size, your gross income and where you live. IRS collection standards include national standards for food, household items, clothing, personal care and “miscellaneous.” Local standards have been established for housing and transportation.  Other budget categories have been established by IRS procedure and custom, and, of course, by zealous negotiation. You can review the IRS collection standards at the IRS web site.

You may find that the IRS collection budget numbers are not particularly generous. For example, the IRS does not care that you have credit card debts or that your child is in private school.  Their position can be that these expenses are not “necessary” and that you should not pay them with money that can be used to pay your tax debt.

As your attorney, my job is to review your budget and identify claimed expenses that are likely to draw an objection from the IRS. Further, if the IRS objects to certain budget items, my job is to negotiate and argue on your behalf that disupted budget items should be allowed.

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Jonathan Ginsberg

Attorney at Ginsberg Law Offices
Attorney Jonathan Ginsberg helps taxpayers work out negotiated settlements of tax debt with the IRS and Georgia Department of Revenue.

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