There are very few experiences as dreadful as owing the Internal Revenue Service (IRS) a large amount of money without the ability to pay anytime soon. Not all hope is lost, however, as there are multiple IRS debt help options available to taxpayers in such a scenario, including IRS Offers in Compromise and IRS Installment Agreement. It’s worth noting that you cannot opt for both the Installment Agreement and Offer in Compromise to settle your taxes. It is crucial to understand which IRS penalty abatement options best suits you. For that, you will need a Dallas tax attorney who can offer you the right kind of IRS offer in compromise tips as well as devise a reliable and effective IRS tax installment agreement. In this blog, we will discuss the pros and cons of IRS Installment Agreements. Let’s get started.
What is an IRS Installment Agreement?
Simply put, an IRS Installment Agreement is an agreement you reach directly with the IRS to pay your federal tax dues over a specific period of time. The IRS offers both short-term and long-term payment arrangements. In Installment Agreements, you need to make monthly payments of a set amount to satisfy your debt. When you enroll in an IRS payment plan (including installment agreement and IRS offers in compromise), the IRS won’t garnish your salary or seize any of your property or bank accounts as long as you’re on top of your payment schedule. Keep in mind, however, that even if you enroll in an IRS payment plan, interest and late payment penalties will still accrue until your debt is zero.
Pros of IRS Installment Agreements
Here are the most notable advantages of IRS Installment Agreements:
- They allow taxpayers to pay off their tax burden over a period of up to 72 months, rather than all at once.
- Additionally, a taxpayer is automatically qualified from an Installment Agreement if they have filed all of their taxes on time and owe the IRS less than $50,000 ($25,000 for corporations).
- Your application cannot be denied by the IRS if you owe less than $10,000 and meet certain additional requirements.
- The application process for not only installment agreements, but most IRS payment plans (including an offer in compromise) is straightforward and painless. All you need is the assistance of experienced Dallas tax attorneys.
- The IRS will stop all collection efforts against you, including bank levies, wage garnishments, and property seizures, as soon as your application is approved, provided that you make all required payments on time and comply with all future tax obligations.
- Besides, you will have 30 days before the IRS reopens collections even if your proposal is denied.
Cons of IRS Installment Agreements
Here are the main disadvantages of IRS Installment Agreements:
- Throughout the duration of your Installment Agreement, any outstanding debt will continue to accrue penalties and interest for unpaid taxes on a monthly basis. As a result, you may end up paying the IRS much more than you initially owed, as it can add up to 8–10% interest annually.
- Individual taxpayers who owe more than $50,000 in taxes, penalties, and interest may still be eligible to negotiate an Installment Agreement, but it will be a considerably more difficult procedure requiring the revelation of certain financial data.
Every year, many taxpayers find themselves in deep trouble by owing the IRS more in taxes than they are able to pay. It’s not a secret that the IRS can initiate several harsh collection processes, including wage garnishment and bank levies. The best way to avoid such a horrible experience is to opt for a payment plan, such as an Installment Agreement, or an IRS offer in compromise. An experienced IRS tax attorney can help you explore the different tax debt relief options to find one that suits you the best. When looking for a reliable team of tax attorneys in Dallas, TX, look no further than the Law Offices of Nick Nemeth. We can help resolve all your IRS tax-related problems. Contact us today for a confidential no-obligation consultation at (972) 426-2553, email email@example.com or fill out our contact form, and we’ll get back to you as soon as possible.