Given the large amount of tax you owe with your tax return and your inability to currently pay the amount due, I think we should consider requesting an installment agreement with the IRS. This will allow you to pay your tax liability on a monthly basis. Generally, if the IRS accepts your installment proposal, you will have 72 months to pay your outstanding Tax Debt. In certain circumstances, you can have longer to pay. Generally, requesting an installment agreement should be a last resort, after considering less costly alternatives, such as getting a bank loan or using available credit on a credit card.
The IRS is not required to accept your installment proposal. They will usually let you know within 30 days after receiving your request as to whether it is approved or denied. If they approve your request, they will send you a notice detailing the terms of the agreement and requesting a fee of $225 ($107 if you enter into a Direct Debit Installment Payment Plan or Agreement, $149 if you enter into an online payment agreement, or $31 for entering into a direct debit online payment agreement).
However, you may qualify for a reduced fee of $43 if your income is below a certain level and you enter into any type of Installment Payment Plan or Agreement, other than a direct debit online payment agreement.
If the IRS approves your request, then you are required to make your monthly payments on time. You also agree to meet all your future tax liabilities. This means that you must have enough withholding or Estimated Tax Payments so that your tax liability for future years is paid in full when you timely file your return.
Your request for an Installment Agreement will be denied if all required tax returns have not been filed. In other words, you have Failed to File.
Any refund due you in a future year will be applied against the amount you owe. If your refund is applied to your balance, you are still required to make your regular monthly installment payment.
You will be subject to interest charges and may be subject to a Late Payment Penalty on any tax not paid by its due date. Interest and any applicable penalties will be charged until the balance is paid in full. To limit interest and penalty charges, you should pay as much of the tax as possible with your return.
Please let me know at your earliest convenience if you are interested in requesting an installment agreement with the IRS. If you are, then I will go ahead and prepare Form 9465 Installment Agreement Request. Then we can set up an appointment review the issues and questions you may have including (not all inclusive):
- Completing and processing IRS Form 2448 Power of Attorney,
- Negotiating with the IRS until final acceptance or rejection of the Installment Agreement,
- Determining balances outstanding with the IRS by year and amount,
- Tax returns outstanding (if any),
- Status of account (ACS Collections, IRS Revenue Officer, Installment agreement, Uncollectible 53 Status, etc.),
- Assessment dates for each year with an outstanding balance,
- Liens filed for each year (if any).
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 06012021-1 320-620)