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  IRS Levy, IRS Liens, IRS Garnishments; State of California Installment Agreements, Levy, Liens and Garnishments - Solutions

The IRS Installment Agreement – an option,

but is it  Right for You?  

Are you aware that the IRS is failing to Properly Evaluate Taxpayers’ Living Expenses and Is Placing Taxpayers in Installment Agreements they cannot afford?

The overall published default rates on I/As mask the economic hardship for taxpayers who do not have enough income to support payment of an IRS proposed installment agreement.

The default rate on Partial Pay Installment Agreements is close to 28 percent, while the rate of default on Installment Agreements worked by IRS field representatives is 26%, and the rate for Automated Collection Services is a little over 20%. [See Taxpayer Advocate 2016 Annual Report to Congress - here].

The Taxpayer Advocate Report advises that nearly 300,000 taxpayers “who should have qualified for currently not collectible (CNC) status had entered into installment agreements in calendar year 2014 despite their income being below the IRS allowable living expense (ALE) standards”.

The point is that that the IRS is not conducting proper financial analysis. This results in taxpayers entering into Installment Agreements they cannot afford while the taxpayer suffers from not being able to pay necessary living expenses.

What is the cost to the taxpayer of setting up an installment agreement which is merely going to default?  The default consequences to the taxpayer include:

      - Not being able to obtain another guaranteed IA (there are specific requirements to qualify) in the subsequent five year period;

      - Not being able to pay for necessary living expenses;

      - An additional user fee for the taxpayer if the taxpayer requests a reinstatement of a defaulted Installment Agreement;

      -  Taxpayers may improperly lower current period withholding in order to make payments on the older tax debt, and end up owing more taxes and penalties, resulting in default of the Installment Agreement; and

      -  the mounting pressure cooker effect that the ever “looming IRS cloud” isn’t going away, and that the taxpayer has merely shifted an “old” IRS debt for a “new” one, and has given the IRS an additional 10 years to collect on the “new” debt. Essentially, the taxpayer has paid the “wrong” taxes due to pressure by the IRS.

       Many Taxpayers agree to an installment agreement they can’t afford because of outright fear of the IRS. Historically, I have had taxpayers concerned about suicide, and situations where children were under suicide watch because of IRS tactics, intimidation and abuse. The Taxpayer Advocate Report advises that “Nearly 300,000 taxpayer accounts that should have qualified for currently not collectible (CNC) status had entered into installment agreements in calendar year 2014 despite their income being below the IRS [Allowable Living Expenses].”  By definition taxpayers who cannot meet their necessary living expenses are experiencing economic hardship. Release of levy should be made, but the IRS will put these Taxpayers into an installment agreement even though such payments cause economic hardship.

      The goal of a payment plan should be a plan that is “realistic for the taxpayer given the taxpayer’s individual circumstances”.  The IRS many times ignores this requirement.  If an Installment Agreement is not the best solution, then other alternatives should be explored, including an Offer in Compromise, Currently Not Collectible, etc…  The plan should provide for strategies to ensure that taxpayers come into compliance and remain compliant.

      The Taxpayer Advocate report concludes, in part, by stating:

“Taxpayers who enter into IAs they cannot afford risk defaulting on the agreement and being subject to further collection efforts. Alternatively, they may attempt to pay the IRS at the expense of meeting their basic living needs. Further compounding this problem are ALEs where the analysis leaves major Household expenses up to the individual discretion of an IRS employee and ALEs that are based on standard expenses that do not reflect the reality of today’s society. Setting taxpayers up to fail at compliance does not comport with taxpayers’ rights, specifically the right to finality and the right to a fair and just tax system. …”

The above are among the many reasons why you should have a tax professional represent you before the IRS.

 Call for your TaxSOS free consultation today.


The above limited information is intended for informational purposes only.  If legal advice or other expert assistance is required, the services of a competent professional should be sought, and this general information should not be relied upon without such professional assistance. 


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