The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes. The IRS Automated Collections System telephone call center agents generally cannot assist taxpayers when their tax liability is over $250,000. Therefore, if a tax liability balance is over $250,000, the IRS will assign a tax liability to a field Revenue Officer to review the account and set up a resolution for the tax liability. Taxpayers often ask about IRS installment agreements.
In late 2016, the IRS piloted a new program that allows taxpayers with liabilities between $50,000 to $100,000 to use the fresh start program and request a streamlined installment agreement over 72 months. The threshold for using an installment agreement without having to supply the IRS with a financial statement has recently been increased to $100,000. Taxpayers who owe up to $100,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months. The taxpayer can merely divide the total tax liability by 72 months to figure the monthly installment agreement amount. If that is not affordable for the taxpayer, the taxpayer must supply financials to show that his or her ability to pay is lower than the streamlined amount.
Taxpayers seeking installment agreements exceeding $100,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $100,000 or less to take advantage of the streamlined installment agreement payment option.
An IRS installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments. In addition, the taxpayer must be current on all filing and payment obligations for the current year.
These changes supplement a number of efforts to help struggling taxpayers, including the modification to the “Fresh Start” program announced last year. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.
How Can a Tax Attorney Help Me?
If you need assistance with back tax liabilities, contact a Los Angeles tax attorney for a free consultation.