An Installment Agreement with the IRS allows taxpayers who are not able to afford to pay their back taxes in full the option to pay through monthly installment payments. Keep in mind that that the IRS uses guidelines to determine the monthly payment amount and the duration/length of time to pay it off. To be able to qualify for an Installment Agreement, the tax payer has to be compliant with all past tax filings. The Installment Agreement may pay all or part of the back tax liability depending on the circumstances and the amount of time the IRS has left to collect the tax debt.
The issue tax payers have to be mindful of is that the IRS may want to collect the most monthly amounts in order to get the tax debt paid faster. This may cause a financial hardship as the installment payments maybe more than what most tax payers are comfortable with. It is more often than not that tax payers may end up defaulting on their payments, this has caused the IRS to begin their collection process all over again. It is essential to have an agreement the tax payer is comfortable at the beginning of this process.
Having an Installment Agreement will seize the IRS collection efforts and will stop them from issuing wage garnishments, bank levies, sending notices and making harassing phone calls. However, tax payers on Installment Agreements continue to pay back tax liability throughout the duration of the Installment agreement on the unpaid portion. It is also possible that the IRS may file a Notice of Federal Tax Lien to protect their interest.
Once a tax payer has established an Installment Agreement, it is crucial that he/she is remains compliant with future tax filings and payments. An Installment Agreement can be a strong solution to those that do not qualify for an Offer in Compromise or Currently Non Collectible status.