Set Up an IRS Payment Plan: Part II of II What’s Next?

After you arrange an IRS Payment Plan, you MUST pay at least the agreed upon payment each month.  You can’t pay ahead and then skip a month.  You can always pay more each, or any month to pay it off sooner, if you so desire. 

There are many reasons why it may be best to hire a Certified Tax Resolution Specialist to represent you in arranging an IRS Installment Plan.  1) One of the first things the IRS will ask you is where do you bank, where do you work and what are your assets.  They want this information at the beginning of the conversation in case you are not successful in making the arrangement for an installment agreement. That way they have all the information to start aggressive collections on your account. Some of the reasons your installment agreement may be denied are failure to file all required returns or unpaid required estimated payments.

2) One of the bigger mistakes made when requesting an Installment Agreement is inflating what your assets are really worth. Also knows as “keeping up with the Jones’ Syndrome. For example, if you have a car payment, obviously you would want to report what you are paying each month as this will increase your monthly expenses. However, the IRS will ask the year of the vehicle and what the Fair Market Value of the vehicle is as of today. At this point, it’s best to look up the values on such sites as KBB.com or NADA; however, did you know you would want to report the value based on trade-in versus private party? The reason is because you want your car value to be as low as possible. The same is true for the value of your home, if encumbered by a mortgage. If you purchased your home some time ago and have been keeping up with the monthly mortgage payments then you would have equity in your home; the question remains as to how much equity. If you over state what your home is worth, the IRS will then inquire as to why you cannot obtain a second mortgage and use the equity to pay your debt. At that point, there is no turning back and you can’t say, just kidding, it’s really worth x amount. 

3) Be reasonable and serious about what your true monthly expenses are. This is not the IRS’ first Rodeo, so they know what to ask, when to ask and how to ask questions to obtain the answer they want. Also, it’s important to know your conversation is being documented into your tax account. So, if you have to call back and speak with another Agent, the answers you already gave are notated in your file. It’s not like you can hang up, call back and start all over with new information or new numbers, unless, of course, you do have new information to provide. The IRS has what’s called National Standards in which they provide up to a certain amount for your monthly expenses. For example, you are one person who has a car payment of $700; the IRS will only allow this payment up to $485. Therefore, this would increase your disposable income by $215 also increasing the amount of your Installment Agreement. In addition, if you are one person in the household, you are only allowed one car; anymore and the amounts will not be included as a monthly expense.

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