Practical Solutions For Every Tax Issue

What Is An Installment Agreement?

On Behalf of | May 14, 2024 | Solutions To Tax Controversies

In some cases, the IRS will allow people to use an installment agreement, rather than paying the taxes that they owe. This type of payment plan essentially sets up a schedule so that the person pays off the debt over time. Someone may not have enough money to pay $100,000 in tax debt all at once, for example, but they can pay $1,000 per month until the debt has been eliminated. These are just example numbers, of course, as everyone’s case will be different.

When someone uses an installment agreement, it prolongs the time that the IRS has to collect the money. It also prohibits them from levying due to the installment agreement that is already in place. In this sense, it can help people find relief and a solution to their tax issues without having to pay the full total at once or worrying about future action by the IRS.

What happens if the agreement is rejected?

If you apply for an installment agreement, the IRS may reject it. This still suspends collection for the next 30 days.

What if you default on payments?

The installment agreement is contingent on you making those monthly payments moving forward. If you fail to do so and default, then the IRS may be able to submit its own proposal to terminate that agreement. You still see the same 30-day suspension that was noted above, and you may have a right to appeal the IRS’s decision.

A complex process

This shows you the basics of how an installment plan is intended to work, but you can see that it can be very complex from one case to the next. If you’re working your way through this process and trying to find financial solutions, it’s imperative that you fully understand all of the legal options at your disposal.