Strategy 2 – Make a Payment Agreement

There are several strategies to consider when it comes to dealing with IRS debt. Making an online Payment Agreement to full-pay the debt over time is the easiest way to get the IRS off your back.

Online Payment Plan Basics
  • Individuals, including sole practitioners and independent contractors, have two choices.
    • Long-term payment plan – total tax, penalties, and interest is $50,000 or less.
    • Short-term payment plan – total tax, penalties, and interest is $100,000 or less and can be paid in 180 days or less
  • Business Payment Plan comes in only one flavor – the total liability must be $25,000 or less.
  • The wonderful thing about these plans is that you do not have to submit financial information.
  • Approval or disapproval will be almost instantaneous.
  • Go to https://www.irs.gov/payments/online-payment-agreement-application
Paper Payment Plan Basics
  • These plans are a lot harder. You must submit financial information about assets that you own and your cash flow so that the IRS can determine what they think your monthly payments should be.
  • The IRS will suspend counting days on the 10-year Statute of Limitations while they consider the request. This process will probably add a minimum of six months to your time in purgatory.
  • The IRS will reluctantly accept payment plan requests that are less than full-pay provided your financial information supports the lower payment.
The Good and Bad of Payment Plans
  • IRS will suspend collection activities if the plan is approved.
  • A majority of payment agreements end up in default. The more plans that you default, the harder it gets to make future deals. The golden rule here is to call them if you can’t make your payments. Do not wait for them to call you.

Payment Agreements are great if you can afford to make payments. My next post will be about what to do when you cannot afford to pay anything.

Author: Jim Payne

Jim Payne, a Florida Certified Public Accountant (CPA) since 1976, offers candid insights on getting square with the IRS — with the least pain, and at the lowest cost — with (or without) the help of a tax representative. Mr. Payne is a former IRS agent and expert in business profitability, IRS audits, IRS payroll tax, and IRS non-filer issues. As a Tax Representative, his goal is clear: " I will speak on your behalf to all IRS agents, so you never have to, and I'll guide you in executing a strategy to resolve your IRS problem so you can get back to enjoying life."

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