How to Negotiate an Installment Agreement With the IRS

IRS data shows that over 14 million taxpayers owe back taxes to the federal government. However, debt to the IRS is not the end of the story for taxpayers. You can negotiate some flexibility on repayment with the IRS in the form of an installment agreement.

Make Sure You Are Current on Your Tax Filings

The first step to negotiating an installment agreement with the IRS is to make sure that you have filed all of your required tax returns. The IRS will not talk about any settlement with those who are delinquent in filing any tax returns. It would not make sense for them to do so because they do not know the full extent of your tax liability. You must also ensure that you are in current compliance with tax laws, notwithstanding the fact that you have a large tax debt.

Disclose Assets to the IRS

The IRS first expects that you will liquidate some of your current assets to pay down your tax liability. For them, an installment agreement is a last resort after you have taken other measures to try to pay back taxes. With that in mind, the IRS will expect disclosure of all your current assets and liabilities. Before approving your agreement, they want to know that you do not first have the ability to borrow elsewhere against your assets to pay taxes. Individuals would put this information on Form 433-A whereas businesses use Form 433-B. It is important that you have the help of a Cherry Hill tax attorney because this form is critical, and it is under the penalty of perjury.

Know and Figure Out Your Repayment Ability

One of the most important things to do is to have a full picture of your tax obligations and your budget for repayment. Once you sign an installment agreement, you must make regular payments on time. If not, the IRS can take legal action. Go through your budget to figure out what a realistic repayment plan would be for you. As a taxpayer, you need to balance between proposing something that the IRS would accept and ensuring that you can stay current on your obligations. You can expect that the IRS will want to go through your income and all of your expenses to ensure that you are paying everything that you can. Their aim is to collect as much of your tax debt as possible before the statute of limitations expires, so they will not want your payment to be too low.

Propose an Arrangement

When it comes to working out a payment arrangement with the IRS, the agency expects you to do the work. After all, it is you who are seeking relief from the legal obligation to pay your taxes in full by April 15. This means that the IRS wants you to propose to them what you think you can pay and when. You would do this by filling out Form 9645, which contains your proposal for your installment agreement. The IRS can either counter your offer with one of their own or reject it. Note that the IRS must allow an installment agreement for certain individual taxpayers, but this allowance does not mean that they have to accept your terms.

There is a point in the negotiation that may involve sitting down with an IRS revenue agent to discuss the actual plan. Although installment agreements are governed by law, there is some room for working with the IRS.

Taxpayers would benefit from the assistance of our NJ tax lawyer in proposing the installment agreement. Our attorney would know what the IRS would be more inclined to accept since the agency is not under any obligation other than to consider your proposal.

If you have issues with the IRS, you might need the help of our NJ tax lawyer. Contact a Cherry Hill attorney at the Dopkin Law Firm at (215) 519-4269 to schedule your initial consultation.