What is an IRS installment agreement?

Taxpayers in Seattle, Washington, who owe the Internal Revenue Service money but are unable to pay may be eligible to set up an installment agreement.

With the April 15 tax date recently passed for this year, many residents around Seattle, Washington, may not have been able to pay the full amount of federal taxes they owed. From Woodinville to Bellevue and beyond, taxpayers are left to figure out how they can address their outstanding balances owed to the Internal Revenue Service.

The IRS recognizes that there are times when people will be unable to pay their tax liabilities. For this reason, the tax agency does offer people the ability to set up a payment plan to satisfy their debts. This is generally referred to quite simply as an IRS installment agreement.

Basic requirements for installment agreements

The IRS does not offer just anyone the ability to enter into an installment agreement to pay outstanding tax bills. Only people who meet certain criteria are able to be approved for these agreements. According to the IRS, an individual who owes more than $50,000 in the combined value of back taxes, interest and penalties may not apply or be approved for an installment agreement. Additionally, if a person has failed to file a tax return, no installment agreement can be granted.

If an installment agreement is approved, the taxpayer must continue to file all tax returns on time, make monthly installment payments on time and keep the IRS updated about any change in address or contact information. Refunds that are owed to a taxpayer who is in an active installment agreement will be allotted to the outstanding balance until the balance is paid in full.

IRS collections actions

The IRS can take some time to initiate collection actions. Forbes indicates that there is a three-year statute of limitations for audits. Because of this, it can take up to three years before the IRS pursues an outstanding debt. However, the interest and penalties on any unpaid taxes begins amassing on the first day that they are past due.

Once an installment agreement request has been filed, the IRS will generally not actively pursue collections nor will it engage in collection activities during an approved installment agreement period. If an initial application for an installment agreement has been denied, the taxpayer may appeal the decision. During this time, collection activities may also be suspended.

Recommendations for taxpayers

Consulting with an experienced tax attorney for advice on any back taxes is always recommended. Tax laws are always subject to change and many rules are complicated. Leveraging the counsel of someone who understands the nuances of the tax code and who knows how to best work with the IRS can give taxpayers help when they owe the IRS money.