Installment Agreements

Installment Agreements (IA) and Your Rights
During the course of agreements, penalties and interest continue to accrue. Generally, no levies may be served during installment agreements.

A. Delinquent Taxes: balance due on assessments.
B. Accrued Taxes: unassessed amounts due.
C. Current Taxes and amounts that become due after the date of contact.

1. Taxpayers with individual income tax liabilities of $10,000 or less (exclusive of penalties and interest) may be guaranteed an IA.

2. Taxpayers with liabilities equal to $25,000 or less may qualify for Streamlined Agreements. There are various methods for making monthly installment agreement payments.

A. Electronic Federal Tax Payment System (EFTPS) – Taxpayers can select the “payment-due with IRS notice” payment type for EFTPS to schedule payments up to 12 months in advance for individual taxpayers and up to 4 months in advance for business taxpayers. You must initiate payments by sending instructions to EFTPS.

B. Direct Debit installment agreements – This is a direct pay from a checking account you maintain.

C. Payroll deduction installment agreements – This is direct pay from your employer.

D. Credit Card installment agreement payment – This is for paying by credit card.

E Payment by check or money order – Pay by check to: “US Treasury.” However, checks made out to “Internal Revenue Service” or “IRS” will be processed.

3. Certain taxpayers who enter into installment agreements on timely filed returns will have the failure to pay penalty reduced from a half to a quarter percent per month for any month in which an installment agreement is in effect.

4. This reduces failure to pay penalty from one half (0.5) to one quarter (0.25) percent per month if all of the following conditions are met.

A. The installment agreement was entered into on or after January 1, 2000;
B. The balances are due from an individual;
C. The tax return(s) was timely filed, including extensions; and
D. No IRS notice was ever sent increasing the failure to pay penalty from one-half (0.5) to one (1) percent.

5. You should always negotiate a designation of payments during installment agreements.

6. Remember:

A. Penalties and interest continue to accrue on unpaid liabilities. So obtain current percentage amounts and interest rates.

B. There is an Installment Agreement User Fee of $105 for new agreements, $45 for reinstated agreements and $52 for direct debit installment agreements. Low income individual taxpayers have the right to apply for a reduced user fee of $43 for entering into an installment agreement or a direct debit agreement. The reduced user fee applies only to individuals (not to partnerships or corporations). There are no exceptions to the $45 fee for reinstating or restructuring an agreement.

C. A notice of federal tax lien may be filed and if a lien was previously filed, it remains on file.

D. There is the possibility of a levy if the agreement is terminated.

E. Current returns for taxes must be filed and current deposits paid to qualify for an agreement. And you are required to make estimated tax payments to avoid accruing new tax liabilities.

F. Federal tax refunds will be offset.

G. There is a right to appeal proposed terminations of installment agreements, terminations of installment agreements and rejections of requests for installment agreements. See “Appeals”

7. In accordance with law, each year the IRS mails Computer Paragraph (CP) 89, “Annual Installment Agreement Statement,” to every installment agreement taxpayer. The statement provides:

  • the dollar amount of beginning account balance(s) due;
  • an itemized listing of payments;
  • an itemized listing of penalties, interest and other charges; and
  • the dollar amount of ending account balance(s) due.

8. IRC 6502(a)(2)(A) provides that statutory periods for collection may be extended in connection with granting installment agreements. However, it is the policy of the Internal Revenue Service that CSED extensions are permitted only in conjunction with Partial Payment Installment Agreements and only in certain situations.

If you or you business have been contacted by the IRS and if you are looking for a tax lawyer to compromise, negotiate, or effectively deal with the IRS, or if you or your business is in need of tax litigation, or tax defense, we, the Michael Ablan Law Firm can help you. With an experienced and aggressive yet honest, trustworthy and friendly legal team consisting of a lawyer with 35 years of experience, specialized paralegals, and a tax accountant, the Michael Ablan Law Firm in La Crosse, WI can help you. We also have offices in La Crescent, Minnesota and Hayward, Wisconsin. Contact us for a free consultation. Our expert legal services are available to you anywhere in the State of Wisconsin including but not limited to the counties of La Crosse, Trempealeau, Monroe, Crawford, Vernon, Grant, Jackson or any other county in Wisconsin or in the state of Minnesota, including all counties surrounding La Crescent, MN, such as Houston and Winona and any other county.

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, if any U.S. federal tax advice contained in this communication, (including any attachments) is not intended or written to be relied upon or used, and cannot be relied upon or used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction of matter addressed herein.