Sometimes you file your tax return and cannot pay the amount that you owe. It could happen if you are self-employed and did not make quarterly payments, or if your payments were too small. In other situations, financial pressures might leave you without enough money to pay your tax bill in full by April 15.
When you find you do not have enough money on hand to pay your taxes in full when they are due, reach out to a trustworthy IRS collections attorney. If you qualify, the IRS could allow you to pay your taxes in monthly installments.
Interest and penalties continue to accrue, but at a lower rate than if the taxes remained unpaid. A Vienna installment agreement lawyer could explain the pros and cons of paying off what you owe in installments.
A taxpayer could apply for a payment plan or installment agreement if the taxpayer has filed all required tax returns. A taxpayer who failed to file a return is not eligible for a payment plan.
Streamlined Installment Agreements are long-term payment plans which are available if a taxpayer owes less than $50,000 in combined taxes, penalties, and interest. The longest term for a plan is 72 months, but they could request a shorter term. The taxpayer makes equal monthly payments until their balance is paid. They can always make a larger payment but cannot pay less than their monthly minimum without going into default. The IRS charges a set-up fee for these plans.
Taxpayers who owe less than $100,000 in combined taxes, penalties, and interest could enter an agreement to pay their balance within 180 days. There is no set-up fee for short-term payment agreements. If a taxpayer owes more than $100,000 in combined taxes, penalties, and interest, an agreement can be entered into for payments to be made until the collection of statute of limitations up to 120 months.
The IRS favors allowing taxpayers to pay in installments but it will not approve every agreement. An individual considering an installment agreement should be aware of common reasons the IRS rejects installment agreement applications.
The IRS might reject an application if the taxpayer has a history of noncompliance or defaulting on payment agreements. If they request a payment schedule that lasts too long or calls for payments so small that not enough progress is made toward paying down the principal, the IRS might reject a plan. If the IRS believes a taxpayer’s expenses are unreasonably high, it could reject a payment plan outright.
Errors or omissions on the application form could also lead to rejection. Working with a Vienna attorney could avoid that result and enhance the likelihood that the IRS will accept an installment agreement plan.
If the IRS rejects a payment plan application, a taxpayer could appeal. Similarly, if the taxpayer misses a payment, the IRS could terminate the installment agreement and that decision could also be appealed.
In many cases, a phone call between a Vienna attorney and the Revenue Officer or Collections Manager could resolve the issue. If the conversation does not produce the desired results, the taxpayer could submit Form 9423 and attach a written explanation of the reason for the appeal. A successful appeal could result in the payment plan being approved or reinstated.
Responding swiftly to an IRS notice rejecting or terminating an installment agreement is critical. If a taxpayer’s application for a payment plan is rejected, they have 30 days to appeal, and if the taxpayer receives a notice of intent to terminate, they typically have a longer time to act. An immediate response is necessary so that the process runs smoothly.
The IRS wants you to pay all your taxes on time, but if you do not have the money on the due date, they will often work with you to get it done, provided that you meet any minimum qualifications.
A Vienna installment agreement lawyer could help you set up a payment plan that factors in your current financial situation and that the agency will accept. Call today to learn more.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.