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5 Types Of IRS Tax Installment Plans And Agreements

Venar Ayar

Owing money to the IRS is common for almost every working individual in the US.  However, a lot of these affected individuals are not aware of the payment options available to them. The IRS has set up tax payment options that can be applied for people in different financial situations. This is established through a payment plan, which is often an agreement between the IRS and the individual in tax debt to pay the amount of tax owed within a particular lengthened time frame.

Depending on the amount owed and the individual’s ability to pay the sum total to the Internal Revenue Service, one can either opt for either a full payment agreement or an installment agreement. There are rules and regulations that govern and help determine which payment plan an individual should go for. This article elaborates on the types of Internal Revenue Service tax installment agreements that would assist indebted tax payers to pay their taxes more conveniently.
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How To File An FBAR For Previous Tax Years

Venar Ayar On FBAR Filings

You have three major option for filing Foreign Bank Account Reports (FBARs) for previous tax years. The best option for you will depend on the specific facts of your case, such as:

  • Whether you failed to report foreign income during the tax years in question.
  • Whether your failure to file was willful or non-willful.
  • Your risk tolerance.
  • How much the estimated amount of penalties will be when using the Streamlined Procedure or the new Offshore Disclosure Framework.

Consult a tax attorney before you use any type of offshore disclosure method to make sure you are correctly following IRS procedures.

Delinquent FBAR Submission

This method involves simply sending in the delinquent FBARs. You don’t pay any penalties and you don’t have to amend your tax returns.

You can only use this strategy if you are not under civil examination or criminal investigation by the IRS and have not been contacted about the delinquent FBARs. You won’t owe any penalties if you didn’t have foreign income or paid tax on your foreign income during the years you failed to file FBARs.

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United States IRS Penalties For Failure To Make Offshore Disclosures On Revenue Or Earnings

Venar Ayar- IRS Penalties On Offshore Disclosures

According to the IRS, the US loses several billions of dollars every year as a consequence of individuals who either hide or fail to report their offshore revenue or foreign earnings. Offshore tax fraud or tax evasion is a crime if it is determined to have been committed willfully and one can face certain penalties or even jail time as imposed by the IRS. It is important to note that the IRS conducts civil audits to determine whether or not you are hiding your offshore income, revenue and filing false tax liabilities.

The IRS requires individuals with offshore accounts, investments, assets, and income to accurately report them and on time. Failure to do so results in penalties by the IRS which can be quite severe depending on the value hidden from taxation. In recent years the Internal Revenue Service alongside the United States government has prioritized the disclosure of offshore and foreign money and assets. Those that willfully choose not to comply or through ignorance do not do so become penalized in ways unique to their crimes and falsifications respectively.

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What Is A Doubt As To Liability Offer In Compromise?

Venar Ayar - OIC

A doubt as to liability Offer in Compromise (OIC) can be used to settle tax debt when there is a legitimate dispute about whether you actually owe the debt. If accepted, you may use a Doubt as to Liability OIC to settle your tax debt for much less than owe, sometimes for pennies on the dollar.

The process of preparing a Doubt as to Liability OIC takes a lot of effort and knowledge of IRS practices, so consult a tax attorney for assistance.

When Doubt As To Liability Exists

Doubt as to liability generally exits when there is a dispute about the tax assessment that couldn’t be argued earlier for some reason. In other words, the time to dispute the tax liability has passed, but you have a good argument for disputing it.

Doubt as to liability may come up in the following situations:

  • New evidence is found after a tax assessment.
  • You were unaware of a tax assessment and never received notices from the IRS.
  • The IRS audited your return and adjusted your tax liability, but you didn’t receive notices from the IRS.
  • You filed an amended return, but it was never processed by the IRS.
  • Errors made by employers on wage information returns or errors made by the IRS.

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How To Appeal The Trust Fund Recovery Penalty

Venar Ayar - Trust Fund Recovery Penal

The trust fund recovery penalty (TFRP) is equal to 100% of any unpaid trust fund taxes. You may become personally responsible for this penalty if the IRS determines that you are a responsible person at the business who willfully failed to send the payroll tax money to the IRS.

The TFRP is a severe penalty, and you should consult a tax attorney if you are being investigated for a possible TFRP assessment.

Negotiating The TFRP

First, you have the option to request mediation before the IRS assess the TFRP. This involves a neutral mediator who will attempt to reach a settlement between you and the IRS.

The good thing about mediation is that it isn’t binding on either party. If you don’t like the deal, the IRS can move forward with the penalty assessment and you can use your formal appeal rights.

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Being Audited By The IRS But Don’t Have Any Receipts?

Venar Ayar - Records For A Tax Audit
IRS Record Keeping Guidelines

The Internal Revenue Service generally advises taxpayers to retain copies of all tax returns and any relevant supporting documentation for at least the previous three tax years. The IRS also provides an extensive list of the types of records they may request if you are audited. These include:

  • Receipts
  • Bills
  • Checks
  • Legal paperwork and documentation
  • Loan agreements
  • Tickets
  • Medical or Dental Records
  • Employment documents

The IRS accepts electronic records in some instances, namely if the electronic records were produced by tax software. If you have any questions about whether your electronic documents and files are acceptable to the IRS, you should contact an experienced tax attorney right away.

Can Lack Of Receipts Derail Your Audit?

While it is imperative that you maintain all your records relating to your tax returns, especially for the last three tax years, if, for some reason, you do not have all the necessary documentation before an audit, you aren’t out of luck completely.

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What’s Considered Reasonable Cause For Penalty Abatement?

Venar Ayar - Reasonable Cause For Penalty Abatement

The IRS may grant penalty relief for reasonable cause based on all the facts and circumstances of your situation. This broad category of penalty relief can cover many different types of accidents or unexpected circumstances.

Typical Reasonable Causes

The IRS lists the following events as “sound reasons” for failing to meet your tax obligations:

  • Fire, casualty, or natural disaster
  • Inability to obtain records
  • Death, serious illness, or incapacitation of the taxpayers or an immediate family member

If one of the situations caused you to miss a tax payment or filing deadline, you may have a good case for reasonable cause penalty abatement.

Other Potential Reasons

The IRS will consider any other reason that shows you used ordinary business care and prudence to follow the tax laws but were unable to do so. These cases usually involve some events that were out of your control, whether due to someone else’s fault or an accident.

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Factors That Indicate How Long It Takes To Pay Off IRS Debt

Venar Ayar- How Long It Takes To Payoff IRS Debt

Several factors will influence how long it takes to pay off your tax debt, including the amount of your balance, how old the tax debt is, and your overall financial situation. You may be able to settle your tax debt relatively quickly if you have low income and few assets. In other cases, you may need to make installment agreement payments over several years or more.

How Much Do You Owe?

The IRS generally wants your tax money as soon as possible. However, flexible payment arrangements are also offered to allow taxpayers to pay back taxes without breaking their budget.

If you owe under $10,000, you can qualify for a guaranteed installment agreement if you can pay off your balance within three years.

If you owe up to $50,000, you can typically pay off your balance over the course of 72 months with a streamlined installment plan by paying with direct debit. Taxpayers who owe $25,000 or less may be eligible for streamlined agreements using other payment methods.

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Why Is Your Tax Refund Being Offset?

Venar Ayar - Tax Refund Offset
What Does It Mean To Have Your Tax Refund Offset?

Instead of receiving the nice tax refund check you’ve been expecting, you get a notice in the mail. It says your tax refund has been offset. What does this mean?

A refund offset means the government has determined that you owe a debt and has applied your tax refund towards this debt. Tax refunds can offset for many types of debts—not just federal tax debts—through the Treasury Offset Program (TOP).

Refund Offsets For Federal Tax Debt

If you owe the IRS money, they will seize your tax refund check. There’s no way around this other than to resolve your tax problems.

Even while you are making payments as part of an installment agreement, the IRS may continue to seize your tax refunds and apply them towards your outstanding balance. You could adjust your withholding amounts on your W-4 or reduce your estimated tax payments, which would reduce the amount of your refund.

However, if you reduce these amounts too much, you could face underpayment penalties.

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What Is An IRS Notice Of Intent To Offset?

Venar Ayar- IRS Notice Of Intent To Offset

If you receive an IRS Notice of Intent to Offset, your tax refund is going to be seized and put towards debt you owe to the IRS or another government agency. As part of the Treasury Offset Program (TOP), your tax refund checks are matched against any outstanding debts you owe a federal or state government agency. When you have an outstanding debt, your refund can be seized up to the amount of debt you owe.

Treasury Offset Program Debts

The TOP can be used to offset your refund when you owe any of the following debts:

  • Unpaid child support
  • Federal tax debt
  • State tax debt
  • Federal non-tax debt, such as federal student loans
  • Some unemployment compensation debts

Your debt can generally be sent to TOP once it is 90 days past due. Your debt won’t go to the IRS—it goes to the agency you owe.

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5 Ways To Stop An IRS Levy

5 Ways To Stop An IRS Levy
How To Stop An IRS Levy

When the IRS is about to levy your assets, you should look for any possible opportunities to stop or delay the levy. Once the levy happens, it’s very difficult to get that property back, but there are several ways to stop a levy before it takes place.

Consider any of these 5 ways to stop an IRS levy and consult a tax attorney to determine which strategy works best for your situation.

1.) Pay In Full

You can stop all IRS collection actions by paying your outstanding tax debt in full, including your back taxes, penalties, and interest. If you don’t have the money on hand, you may be able to sell some assets, borrow against your home, or borrow the money from friends and family.

2.) Request A Payment Plan

The IRS won’t levy your assets if you are making monthly payments as part of an installment agreement. You’ll also be required to file all required tax returns and pay all current tax obligations, such as estimated tax payments.

As a bonus, the IRS will generally delay a pending levy while they are considering your installment agreement request.

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