What are the Effects of an IRS Tax Installment Agreement?
Once an IRS tax payment plan is established for your back taxes, the IRS will refrain from engaging in enforced collection action against you. This includes refraining from levying your bank accounts or wages as long as you stay current with all future tax filings and your payments. Although the IRS will refrain from levy action against your bank accounts and wages and won’t seize your property, the agency may file a federal tax lien to secure compliance with the installment payment arrangement, depending upon how much you owe. A federal tax lien gives the IRS priority over other creditors when it comes to assets and property. Once he learns the details of your case, Attorney Timothy S. Hart can advise you whether this may be a possibility. If you have received notice CP501 or any other notices about unpaid taxes, you should try to set up a payment plan before the IRS starts sending more serious notices. Additionally, in most cases, setting up a payment plan prevents the IRS from coming after you with involuntary collection actions such as garnishments or seizures.
Types of IRS Tax Installment Agreements
There are several different types of IRS tax installment agreements. Which is the right one for you will depending upon your individual situation. IRS tax installment agreements include the following:
- Guaranteed – You owe less than $10,000, not including penalties and interest.
- Streamlined – You owe up to $50,000 in unpaid taxes, including interest and penalties.
- Non-streamlined – You owe over $50,000; to potentially qualify, you must complete IRS Form 433-F, which is a collection information statement that asks for in-depth information about income and debts.
- Partial payment – You may qualify for this installment agreement, also called a PPIA, if you can prove to the IRS through detailed financial information provided on Form 433-F that you are unable to pay the full amount owed.
There are additional conditions that must be met for each of these installment agreements. Once our attorney understands your situation, they can counsel you on which payment plan option you may qualify for.
How to Make Payments to the IRS
When you have been approved for an IRS tax installment plan, there are several different ways you can make your monthly payments:
- Payroll deduction if your employer agrees to it
- Direct debit electronic transfer from your bank account
- Online through the IRS electronic payment system
- Through the mail by check, money order, credit/debit card.
There are some benefits to direct debit and payroll deduction payment methods because, once set up, they take the work of making payments out of your hands and you can’t forget a payment or be late.
How to Apply for an IRS Installment Agreement
You can apply for an installment agreement online if you owe less than $50,000 including penalties. Otherwise, you can apply over the phone or through the mail. In both cases, you will need to provide the details from Form 9465 (Installment Agreement Request). If you want to apply over the phone (which tends to be faster than the mail), just fill out this form and call the IRS with the details. Then, the IRS will send you Form 433-D to finalize your agreement and set up direct debit payments if required or preferred.
New York Tax Installment Agreement
If you owe taxes in New York State, our attorney can explain types of plans and help you negotiate a workable NYS tax installment agreement. New York tax installment agreement payments can be made through direct debit, online or by mail.
How to Keep Your Tax Payment Plan in Good Standing
You can keep your IRS tax payment plan or NYS tax payment plan in good standing and avoid the serious problems you may face if you default by:
- Paying at least your minimum monthly payment when it’s due. If your payment is even one day late, your payment plan may default.
- Including your name, address, social security number, daytime phone number, tax year and return type on your tax payment to make sure it gets associated with your account.
- Filing all required federal and state tax returns on time.
- Paying all taxes you owe in full and on time. (Contact our tax attorney right away to change your existing agreement if you cannot pay in full and on time.)
- Continuing to make all scheduled payments even if the IRS or NYS applies a refund to your account balance.
If you default on your agreement by doing any of the above, the IRS will send you notice CP523. This notice explains the agency’s plan to terminate your installment agreement, and it gives you 30 days to address the situation.
If you are having trouble meeting your payment plan commitment, contact Tax Attorney Timothy S. Hart immediately. He can help you change your existing agreement if you cannot pay in full and on time.
If you are mailing payments, be sure to ensure that they are sent to the correct tax agency address. Also, if you move, be sure to update your address with the IRS or state. Complete and mail Form 8822, Change of Address, to the IRS, or change your address with NYS here.
What Happens If I Default on an IRS or New York Tax Installment Agreement?
The terms of installment agreements require that taxpayers stay in compliance by paying all taxes owed on time, filing all tax returns on time, and not incurring new unpaid tax liabilities. As sometimes happens in tough economic times, though, taxpayers may find they cannot afford the payment plan and so they stop making monthly payments. Both the IRS and NYS call this defaulting on the tax installment payment agreement.
If you find yourself in this predicament, it is important to be proactive and contact the IRS or NYS to work out an alternate payment arrangement. When you reach out and try to find a solution, the IRS and NYS Tax Department will typically be more cooperative in working with you. While this seems like a common sense observation, sometimes people in this situation are embarrassed and just try to ignore the problem, which puts them at risk of harsh collection activities.
With just one missed payment, the tax agencies may overlook the default. If the situation is that you believe you cannot make the payments as previously agreed, or if there is a new tax liability, normally a new tax payment plan will need to be established. But it is much easier to establish a new payment plan before a technical default has occurred.
Reach Out for Knowledgeable Tax Help
If you’ve found you cannot make your tax installment payments, get help right away. Tax attorney Timothy S. Hart can communicate with the IRS or NY state on your behalf and work to negotiate a new payment plan. If you have already defaulted on your tax installment agreement and are facing liens or levies, our attorney will advocate strongly for your rights and interests and help you appeal these harsh collection tactics. Call our Albany office at (518) 213-3445 or our New York City office at (917) 382-5142 to schedule a free consultation.
Common Questions About Tax Payment Plans
The following questions address concerns we frequently hear about tax payment plans.
Even if you don’t think you have enough money to pay your tax liability, it is crucial that you still file your returns. Timothy S. Hart can help guide you in this situation and will negotiate with the IRS or NYS to try and find a payment plan that may work for you. If the IRS believes you are not financially capable of making any payments at the present time, they will not accept the payment plan and may delay collecting taxes from you until you are in better financial health.
Yes. There are situations in which the IRS may not agree to a payment plan. If the taxpayer defaulted on a past installment agreement or provided financial or other information that wasn’t true, they may be turned down for a tax payment plan. Or if the IRS, after reviewing the taxpayer’s income and expenses, believes that some of the expenses are non-essential, the installment agreement proposal may be turned down. If this has happened to you, reach out to our tax attorney who may be able to negotiate with the IRS on your behalf or counsel you about other potential tax relief options.
Interest continues to accrue on the diminishing unpaid balance of tax debt until it is paid off. Interest on unpaid debt and penalties for late or non-payment can add up to as much as 10% per year. Our tax attorney may be able to negotiate a reduction or waiver of interest and/or penalties depending upon the circumstances, in order to get you the lowest monthly payment possible.
You do not have to work with an attorney to apply for a tax payment plan with the IRS or state. You can contact the tax agency directly and handle the process on your own. However, because tax laws are so complex and ever-changing, by working with a skilled tax attorney who has in-depth understanding of federal and NYS tax laws, you increase your chances of negotiating a more favorable installment agreement. A tax lawyer is especially beneficial if you owe a large amount of tax debt, have unfiled returns, had an existing installment agreement on which you have defaulted or have a lien against you or are being threatened with a levy.
Our attorney knows how stressful it is to owe the IRS money. Timothy S. Hart wants to help you get a tax payment plan that is workable for your individual situation. Contact us today for a free consultation.
Our Attorney Can Help You Discover Whether a Tax Payment Plan is the Right Solution for You
There are many factors to consider before seeking a tax installment agreement. To begin with, you are probably assuming that the amount of tax debt that the IRS says you owe is accurate. Either you or the IRS could have made a mistake with respect to the amount owed, so it would be to your benefit to confirm the amount is correct. Our tax attorney, who is also a Certified Public Accountant, can help you in assessing your tax debt.
Depending on your specific circumstances, with the help of Timothy S. Hart, who is a successful tax negotiator, you may be able to have some of your debt reduced, as there are allowances within the tax laws for special circumstances. IRS agents have the authority to negotiate tax matters. They are not bound by rigid laws that do not allow them to view each taxpayer’s situation as an individual matter.
It also must be determined whether you qualify for a tax installment agreement. For example, if you are not up to date with filing your tax returns and you may have even received Form 15103, you may not qualify. Or if you owe too much, then negotiating your payment plan becomes far more complex, and you will have to produce a great deal of detailed financial information.
To get control of your stressful tax debt burden, consult with a professional tax attorney who will strongly advocate for your interests. Once Attorney Timothy S. Hart understands your case, you can trust him to work hard to negotiate a beneficial solution with the IRS or NYS.
Arranging an IRS payment plan is complicated. When you work with our tax attorney, you can rest assured that he will completely examine your situation to negotiate a solution that will not leave you financially strapped each month.
Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ 
