The IRS will always accept some type of payment arrangement for past due taxes.
In order to qualify for a payment plan with the IRS, you must meet the following rules and provide the IRS with this information:
- You must have filed all tax returns. (It's OK to owe money but you must file)
- You will need to disclose all assets owned including all cash and bank accounts.
- You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
- You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
- You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA's or 401K's.
Assuming that you comply with the above list, we can arrange a repayment of taxes with the IRS. The total dollar amount you owe usually dictates with whom the negotiations will be handled. Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $25,000.
The IRS will ask you to complete a personal financial statement and if a business is involved, then you will need a business financial statement. The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses. The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis. These monthly payments will continue until your outstanding tax liabilities are paid in full.
WARNING! The IRS continues to add penalties and interest while you are making monthly payments. This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest. The IRS will not explain this to you!
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