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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2421
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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My wife and I owe about $115,000 in federal income taxes for

Customer Question

My wife and I owe about $115,000 in federal income taxes for 2010 (after paying about $50,000 on time - it was a good year income wise - but we [knowingly] used a chunk of the money for a down payment on a home).
We have been making $2,500 per month payments since November. We filed a 433A information form for self-employed taxpayers along with an installment plan request. We are trying to avoid a tax lien on our home.
Our accountant today emailed us to report that the agent assigned to our case has verbally rejected the installment plan request, appears to be demanding immediate full payment, is threatening to record a lien next week,and is suggesting that we liquidate our IRA account to pay the tax.
. My understanding is that a decision to reject an installment plan request must be in writing; that we have a right to an appeal, and a right to talk to an immediate supervisor if we want to challenge a decision communicated verbally. I am also concerned about the pressure to liquidate our IRA (and take a tax hit on that) when we have the resources to make installment payments. Further, a tax lien on our home will destroy my personal and business credit, trigger a possible foreclosure on my home by the lender, and thereby make it much more difficult for us to pay off the taxes owed.
We are willing to pay the taxes in full, with interest etc. We just need a payment plan to do so, and without the devastation that a tax lien might create. While in the past I have been late some years in paying income taxes (I am self employed), I always paid in full, and have never had a lien or other collection action taken against me. My credit score is over 720.
We are meeting with our accountant tomorrow. I am beginning to think that she needs to be more aggressive in asserting our position. What do you think? And, what negotiating tips might you have?
Submitted: 5 years ago.
Category: Tax
Expert:  Anne replied 5 years ago.

Thank you for using justanswer. I switched formats for answering your question...the other format hangs up my computer.

If the IRS Refuses Your Installment Agreement Proposal

If the IRS won't agree to installment payments, it is for one of three reasons:

  • Your living expenses are not all considered necessary. The IRS may deem your expenses extravagant. For example, if you have hefty credit card payments, make any charitable contributions, or send your kids to private school, expect the IRS to balk. Although reasonable people would disagree on what is necessary and what is extravagant, the IRS is rather stingy here.
  • Information you provided on your Collection Information Statement, Form 433-A, is incomplete or untruthful. The IRS may think you are hiding property or income. For example, if public records show your name on real estate or motor vehicles that you didn't list, or the IRS received W-2 or 1099 forms showing more income than you listed, be prepared to explain.
  • You defaulted on a prior IA. While this doesn't automatically disqualify you from a new IA, it can cause your new proposal to be met with skepticism.

If your IA proposal is first rejected, you can keep negotiating. Ask to speak to the collector's manager. Just making this request is sometimes enough to soften the collector up. If you get nowhere with the manager, you can go over her head -- everyone at the IRS has a boss. You can complain to her immediate boss, then the collections branch chief, and then the district director. Squeaky wheels sometimes do get greased. Again, just talking about going up the ladder may cause a change in attitude at the lower rungs and get you a fair payment plan.


For more in depth information, please see below:


Publication 1660 (6-2011)


If the link doesn't work, you may copy & paste the information into your web browser:


I hope this helps.