IRS Installment Agreement or Voluntary Payments?
The IRS Collection machine is intimidating. It’s set up that way to encourage voluntary compliance with stiff penalties, high interest rates and intimidating collection tactics. Of course, voluntary compliance is the easiest way to avoid the IRS Collection cross hairs. But for some, extraordinary circumstances cause a lapse in tax compliance and a mounting back tax liability. If you’re tackling a back-tax liability, especially payroll tax, you need to know how to protect yourself and your business. One rule to live by while dealing with the IRS Collection group or your State Taxing Authority, is that nothing is real until it’s in writing.
Recently, group discussions at M&M revolved around some of the confusion our prospective clients have about IRS Collection procedures. One big issue was the difference between a Voluntary Monthly Payment Arrangement and a Formal IRS Installment Agreement (IA). There is a big difference that a lot of struggling taxpayers don’t seem to pick up on right away.
Is Your IRS Resolution in Writing?
Are You Protected?
Many IRS Revenue Officers (ROs) will request a regular payment while working through the collection process. When you verbally agree to make payments, and make them as scheduled, you have entered into a verbal agreement with your RO. This will demonstrate your ability to pay and your willingness to cooperate, but it doesn’t mean much as far as your protection is concerned.
Please don’t think that I am telling you Voluntary Payments are bad. I’m not. In fact, when applied correctly Voluntary Payments can be very useful. However, when compared to a Formal IRS Installment Agreement approved in writing, a verbal agreement with your RO does not stack up in terms of your protection. Look at the two situations side by side.
Verbal Agreement / Formal IRS IA in Writing
Monthly Payment Subject to Increase YES NO
Bank Levy Protection NO YES
A/R Levy Protection NO YES
Wage Garnishment Protection NO YES
Appeal Rights NO YES
A Formal IRS Installment Agreement
Why Is It So Important to Your Protection?
While in a verbal agreement, your RO could demand a higher amount at any time. In a formal Installment Agreement, you know your monthly payment will continue at the agreed upon amount.
Verbal agreements do not protect you from bank account levies, account receivable levies, wage garnishments or other asset seizures. While in a formal Installment Agreement, the IRS will not levy your funds or seize your assets as long as you meet the terms or your agreement.
A verbal agreement with your RO does not come with Appeal rights. If you miss a payment and your RO wants to levy your account, she can do it. If you default a formal IRS Installment Agreement, you have the right to Appeal the default within 30 days. You also have the chance to get it reinstated within 30 days to regain the protection it offers from levies and garnishments.
Call M&M to find out how we can help you secure a formal Installment Agreement to pay your tax liability over time, 866-487-5624.