Bob Appel, EA

The IRS requires that back taxes are paid ASAP. Individuals or businesses that are not able to resolve a tax debt immediately, should consider an installment agreement as a possible option. Installment agreements allow for full payment of your tax debt in smaller amounts over a period time. To be eligible for an IRS installment agreement, all returns that are due (or overdue) must first be filed. Installment agreements generally require equal monthly payments. The amount of each installment payment will be based on the amount of back taxes owed and consideration is given to the taxpayer’s ability to pay that amount within the time available for the IRS to collect. By law, the IRS has the authority to collect outstanding back taxes for ten years from the date of the tax assessment. The key objective is to demonstrate to the IRS that you can’t pay all your back taxes and therefore another solution may be necessary. The advantage of an Installment Agreement is that no enforced collection takes place while the taxpayer is on the plan (provided the client doesn’t default). Be aware that with an Installment Agreement interest and penalties continue to accrue over time.