IRS Tax Relief Strategies: The Advantages & Disadvantages of IRS Installment Agreements

Most taxpayers do not realize that the IRS is surprisingly willing to work with them in order to help them find ways to satisfy their tax debts without placing an unreasonable financial burden on them and their loved ones. As we’ve discussed in a previous blog, one common relief strategy taxpayers can take advantage of when they are struggling to fulfill their tax liability is the “offer-in-compromise.” Another great option for many people is known as the IRS Installment Agreement.

An installment agreement is a means of breaking up your debt into payments which you will pay to the IRS over time.  Thus, rather than facing the full burden of your tax obligations at once, you can pay a more affordable amount back periodically.  There are several key advantages and disadvantages to utilizing this strategy, which are outlined below:


1) First and foremost, the key benefit of an installment agreement is exactly what the name implies: you will be able to space out the repayment of your tax liabilities in a manner which more reasonably suits your financial circumstances.  Rather than being required to pay back your debt in a lump sum, you can make periodic payments to the IRS over a predetermined period of time, similar to paying back a student loan debt or some other form of financing. Generally, you will make monthly payments, but this could vary depending on your specific circumstances and the agreement you settle upon with the IRS.

2) Secondly, submitting an installment agreement request will immediately cease collection actions being taken against you by the IRS.  The IRS has broad powers when it comes to enforcing the tax code, and there are a number of different actions they can take in order to collect unpaid debts from taxpayers.  For example, they may garnish your wages or even seize your property in extreme cases in the name of fulfilling your tax obligations.  While your installment agreement is in force and you continue to fulfill your payment obligations, the IRS cannot take most other types of forced collection actions against you.


1) It may more convenient for you to spread your payments out, but it is not always the best option.  It is important to keep in mind that, throughout the time period while the installment agreement is in force, your tax debts will continue to accrue interest and penalties which can increase your tax liability exponentially depending on the size of your debt and how long the installment agreement lasts.  These additional costs will continue to add up until you have fulfilled 100% of your tax liability.  Thus, it is in your best interests to pay off the debt as quickly as you reasonably can.

2) Despite your installment agreement, the IRS will still be able to file a Notice of Federal Tax Lien, which might affect your credit.  Placing a lien on your property gives the government a legal claim to it and ensures that, if the property is sold, the IRS will be able to collect your unpaid debts from the profits of that sale.  It is possible, however, to have a tax lien withdrawn if you fulfill certain eligibility requirements for a Direct Debit Installment Agreement.

If you are struggling to fulfill your tax obligations to the IRS, please contact Attorney Robert V. Boeshaar today to discuss your options and to learn whether an installment agreement could be right for your unique circumstances.

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