The Inner Workings of a Law Firm

The Inner Workings of a Law Firm

Resolving Unpaid Tax Balances With An IRS Installment Agreement

by Jo Rodriquez

If an outstanding income tax balance remains unpaid for long enough, it becomes subject to IRS collection activities. At some point in the process, an individual who owes the IRS could experience some type of enforcement action. For individuals unable to pay their tax balance in full, the IRS offers an installment payment arrangement.

The prospect of receiving a wage garnishment or a bank levy provides strong incentive for an individual to make arrangements to settle a tax balance. Once you apply for an installment agreement, the IRS generally refrains from taking further enforcement actions. The steps required to request an installment agreement depend on how soon you can pay and the amount of your unpaid tax balance.

Payment within 120 days

The most straightforward payment arrangement is available if you can pay in full within 120 days. You may apply for this short-term agreement if you owe less than $100,000. There is no fee to set up a short-term agreement, but interest and late penalties are typically added to the balance. For tax balances requiring more than 120 days to pay, longer terms may be approved if your balance is within specified thresholds.

Balance of $50,000 or less

If you owe $50,000 or less in total, the IRS provides an online application process to request an installment agreement. The maximum length of the installment agreement is 72 months. It is crucial to understand the compliance requirements of an installment agreement.

To gain approval of an installment agreement application, you must be current on all other federal income taxes. If approval is received, you must remain current on subsequent filing and payment requirements. The failure to meet the terms of the agreement might result in a return of collection activity, so it is essential to agree to realistic terms that can be met.

Balance of more than $50,000

If you are ineligible for an online agreement, you may use IRS Form 9465 to apply for a payment arrangement. Along with Form 9465, the IRS is likely to request a financial information statement to justify the terms required to settle a larger balance.

An unpaid tax balance can sometimes be financially overwhelming. If an installment agreement is not a practical solution, the IRS may consider a settlement option referred to as an offer in compromise. If an offer in compromise is approved, your tax balance is reduced to a lesser amount. Contact a tax attorney for more information about the options for resolving tax issues.

To learn more, contact a tax attorney like Dermot F Kennedy


About Me

The Inner Workings of a Law Firm

We all know that lawyers are professionals who help people interpret and work with the law, but do you know how a law firm works from the inside out? I am a professional paralegal, and I have worked in both large and small law firms during my career. I can tell you that a successful law firm needs more than just lawyers to keep it running smoothly, and sometimes things can get really crazy! Take a tour through a law firm in my blog, and find out what really goes on behind the scenes of an active and successful law firm.