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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1085
Experience:  US Taxation specialist.
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Hi Does the IRS do installment agreements if you owe back

Customer Question

Hi
Does the IRS do installment agreements if you owe back taxes of about $250,000?
Submitted: 2 years ago.
Category: Tax
Expert:  USTaxAdvising replied 2 years ago.

Yes! If you're not financially able to pay your tax debt immediately you can make monthly payments through an installment agreement.(However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full.) You should also call the number shown on your tax bill to communicate with the IRS, telling them that you can't pay and that you would like an installment agreement. (note that they may deny this request if they deem you financially able to pay)

 

How to apply for the installment agreement:

Complete and mail Form 9465, Installment Agreement Request (PDF). If you owe more than $25,000, you will also need to complete Form 433-F, Collection Information Statement (PDF).

 

To keep your account in good standing:

  • Pay at least your minimum monthly payment when it's due (direct debit or payroll deductions make this easy);
  • Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
  • File all required tax returns on time;
  • Pay all taxes you owe in full and on time (contact us to change your existing agreement if you cannot);
  • Continue to make all scheduled payments even if we apply your refund to your account balance; and
  • Ensure your statement is sent to the correct address, contact us if you move or complete and mail Form 8822, Change of Address (PDF).

 

I hope this helps. Let me know if you have any further questions.
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1085
Experience: US Taxation specialist.
USTaxAdvising and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Hi

Will they put a lien on the house if you are on an installment plan?

Expert:  Robin D. replied 2 years ago.

Hello,

Although the IRS will refrain from levy action against bank accounts and wages, or seizing taxpayer property, the IRS may file a federal tax lien to secure compliance with the installment payment arrangement. The IRS views a tax lien as a "passive" collection device because it does not cause the immediate seizure of taxpayer property.

Customer: replied 2 years ago.
You say they may file a tax lien. So if you are on an installment agreement, they still issue a tax lien? Seems they would not if the person is on an installment plan. I don't get it.
Expert:  Robin D. replied 2 years ago.
Like I explained, a lien is just to protect the governments position. It is not a step to take the property. If the person were to sale the property then the government would be able to get the debt paid from the sale. Of course if someone is trying to sale their property the IRS will make the lien secondary so a sale can be allowed or easier.
Customer: replied 2 years ago.
But don't liens show up on credit bureau reports?
Expert:  Robin D. replied 2 years ago.
Yes
Expert:  USTaxAdvising replied 2 years ago.

The expert above is absolutely correct regarding the liens but is should be noted that the IRS will probably only file a tax lien on your property if you have defaulted on your installment agreement. See page 2 of Form 9465 instructions - "If you do not make your payments on time or do not pay any balance due on a return you file later, you will be in default on your agreement and we make take enforcement actions, such as the filing of Notice of Federal Tax Lien, or an IRS levy action, to collect the entire amount you owe."

Form 9465 Instructions - http://www.irs.gov/pub/irs-pdf/i9465.pdf

 

The IRS may file the lien just to secure their interest.(as mentioned by the other expert) "Even if you set up an installment agreement, we may still file a Notice of Federal Tax Lien to secure the government's interest until you make your final payment." See the link here - http://www.irs.gov/taxpros/article/0,,id=99090,00.html

 

If you can pay the liability off within 120 days there is no need to apply for an installment agreement.

 

I have not seen the IRS file a federal tax lien when a taxpayer is in good standing on his/her installment agreement. Perhaps the other expert, Robin D, has, and could provide her opinion on this matter.

 

Good luck and let us know if you have any further questions.

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1085
Experience: US Taxation specialist.
USTaxAdvising and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you for the clarification. Does this same information apply even if the amount owed is over $50,000? Meaning, if on an installment agreement for more than $50,000 and in good standing, there will most likely not be a tax lien?
Expert:  USTaxAdvising replied 2 years ago.
Yes, the same information applies even though the amount is over 50K. I cannot provide you with positive assurance that the IRS will not file the lien for the reasons provided above. I would recommend calling the IRS(at he number shown on your bill) and tell them that you would like an installment agreement. Next I would inquire what the likelihood is of a lien. Sorry I can't be more helpful than that. I am conferring with some other colleagues and will get back to you if I get additional information for you.
Expert:  USTaxAdvising replied 2 years ago.

My colleague has provided the following response.

 

Yes - filing the tax lien is very common. Especially for those with tax debts above $25,000. Regardless of installment agreement.

Installment agreement will prevent the levy or enforcing the tax lien but will not prevent the tax lien itself. The purposes of the lien - to protect the government's interest in taxpayer's assets.

For those with the debt amount above $100,000 - the IRS normally requires to sell some assets.

 

So it sounds like the IRS will more likely than not file the lien.

Expert:  TaxWhisperer replied 2 years ago.
The IRS will almost certainly file a tax lien for $250K in conjunction with an installment agreement. It is possible to negotiate up front for them not to file if you have a very good reason.

You might try changing your address of record with the IRS right away if a lien hasn't been filed.

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