Los Angeles Tax Installment Agreements: Robert Hoffman

Installment Tax Agreements

The process of determining your solution to tax problems should always begin with a detailed analysis of your financial situation with the goal of reaching a settlement with the tax bureau at issue. If you are not able to settle the debt through an Offer in Compromise, the question becomes “Now what do I do?”

If you are not eligible for an Offer in Compromise, you can establish a payment plan (or Installment Agreement) with the IRS. The best course of action at this point will depend on (1) your income, assets and expenses, and (2) the total amount of tax assessed against you – before penalties and interest.

Eligible for a Streamlined Installment Agreement?

Depending on how much you owe, you might be eligible for a Streamlined Installment Agreement, which is essentially a payment plan that can be set up without submitting financial information. Under the IRS’s Fresh Start Initiative, a taxpayer can enter a streamlined Installment Agreement if the amount owed is under $50,000. However, a thorough review of your financial data can be beneficial to ensure that you can afford the monthly payment and to assess whether a different option might be of greater benefit. This action can also help you determine what you can afford to pay to handle state tax problems.

Because the IRS only has 10 years to collect an assessed tax, it is possible to enter a payment plan that does not result in full payment. The balances will expire and the penalties and interest will become irrelevant. This is called a partial payment installment agreement. The major shortcoming of a partial payment installment agreement is that a lien will be filed and appear on your credit report. On the other hand, partial payment agreements often result in a lower total amount paid than the best possible Offer in Compromise, and you won’t be required to pay out a lump sum.