Can the IRS collect from me if I have an installment plan already in place?
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Jeffrey Johnson
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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...
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UPDATED: Jul 12, 2023
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UPDATED: Jul 12, 2023
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
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If the installment plan that you negotiated with the IRS is not backed by the proper legal documentation, the IRS can continue to levy and lien your property and assets. Any IRS installment plan agreement you enter into should be signed both by you and by an IRS official to ensure its validity.
An installment plan allows a debtor the opportunity to pay their debt in smaller increments when full payment is not an option. For the purposes of paying back-owed taxes, the IRS is given the authority to negotiate an IRS installment plan with a debtor and reduce overall tax debt accordingly. No installment plan is valid unless it has proper legal documentation backing it up.
Proper Legal Documentation for an IRS Installment Plan
The proper legal document for an installment plan would be a professionally drafted, signed, and dated contract. An example of the necessary wording for the contract would include: “I (your name) hereby agree that my back-owed taxes will be paid in increments of 10% each month for the next 10 months. This IRS installment plan was negotiated with (the tax agent’s name) and shall be enforced without any further actions to collect during the duration of the installment plan.” You would then both sign and date the contract and keep a copy.
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Case Studies: IRS Installment Plans and Collection
Case Study 1: Lack of Proper Legal Documentation
David enters into an installment plan with the IRS to pay off his back-owed taxes. However, the agreement is not backed by the proper legal documentation. The IRS later discovers this oversight and continues to levy and lien David’s property and assets.
David argues that he had an installment plan in place, but without the proper legal documentation, the IRS is not bound by the agreement. The court rules in favor of the IRS, allowing them to proceed with collection activities.
Case Study 2: Properly Drafted Installment Plan Contract
Sarah negotiates an installment plan with the IRS to address her tax debt. Her tax attorney ensures that the agreement is supported by a professionally drafted, signed, and dated contract. The contract clearly outlines the terms of the installment plan, including the monthly payment amount and the duration of the plan.
Sarah adheres to the terms and successfully completes the installment plan, fulfilling her tax obligations as agreed.
Case Study 3: Negotiating an Installment Plan with Legal Assistance
Michael is overwhelmed by his tax debt and decides to negotiate an installment plan with the IRS. He understands the importance of seeking legal assistance and hires a tax attorney to handle the negotiations and drafting of the installment plan contract.
With the help of his attorney, Michael successfully negotiates a reduced amount of owed debt and establishes a feasible payment plan. The attorney ensures that the installment plan is properly documented and advises Michael on the reporting requirements for any forgiven amount.
Negotiating an Installment Plan with the IRS
It is never wise to negotiate an installment plan with the IRS alone. Instead, you should contact a tax attorney who can handle both the negotiations and the contract. Your attorney will use every negotiating technique available to reduce the overall amount of owed debt in your favor. Keep in mind that any time debts are reduced and amounts forgiven, the forgiven amount must also be reported on your taxes as income. So, even though you are not paying the entire amount because of your IRS installment plan, you’ll still be responsible for the appropriate percentage of it on your next tax return.
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Jeffrey Johnson
Insurance Lawyer
Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...
Insurance Lawyer
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.