IRS installment agreements

With only seven weeks left in 2011, it is a good time to visit your CPA and identify any tax planning techniques that may be available to help you reduce your tax bill.  However, even with adequate planning, you may ultimately find yourself owing a sizeable tax bill come April 15th.
If you are unable to pay your tax bill in full, the IRS does offer an installment agreement program.  To participate, your tax bill (taxes, interest and penalties) must be less than $25,000.  Installment agreements are available for 60 month periods or less.  
There are a few items you should keep in mind if you need to utilize an installment agreement.  You should first seek other alternatives as there are user fees associated with the agreement and penalty and interest accrue until the taxes are paid in full.  The user fee can be avoided if you can pay the total tax bill with 120 days.  A recent report indicates that you must request this waiver of user fees, as the IRS is not required to inform you of this option.
Installment agreements can be acquired online, and payments are set-up on a monthly basis.  You can elect direct debit and payroll reductions to ensure you don’t miss any payments, or the IRS will send you a monthly statement.  Keep in mind that any future federal tax refunds will go against this balance until it is paid in full.
Hopefully you will not find yourself in this situation, however if you do, you should contact your tax professional to ensure you understand the terms of any installment agreement and discuss if that is your best option.
/posted by Vickie Tischendorf, CPA