Tax Law Blog | IRS Tax Attorneys

If you owe debt to the IRS and cannot pay in full a payment plan or IRS installment agreement may be negotiated. While this may be a good option for you to avoid wage garnishment, tax levies, etc., generally the faster you pay off the debt the less fees and penalties you will be subjected to. Interest on these plans is usually 8% to 10% per year. If you owe $25,000 or less, you should be able to get an installment plan  for 60 months, no questions asked. If you owe more than $25,000, you will have to negotiate with the IRS to get an installment plan.

Negotiating an Installment Agreement With the IRS

If you do Owe more than $25,000 the negotiating will begin with an IRS collector analyzing your Collection Information Statement on Form 433-A. This form will be used to determine the amount you are eligible to pay. When you fill out the form you should never agree to pay more than you can afford just to get your plan approved. When negotiating, you should offer to pay the amount of your income minus your necessary living expenses. If the IRS approves an installment agreement, it may take several months to notify you, but it is a good idea to send a first payment ( and 2nd and 3rd and so on) until the IRS notifies you of its decision. If your offer was refused, the payments will still go to your unsettled tax debt.

If the IRS did refuse your offer, it is probably because they don’t consider all of your living expenses necessary. Not that you should give up everything, but try and be a little flexible here. Also, if the information you provided on form 433-A was inaccurate or you failed on a different installment agreement you may also be refused your payment plan. If your first offer was rejected, for whatever reason, you may continue to negotiate. The amount you offer is up to you, but be realistic. If you get the installment plan approved there are a few things that can have it revoked such as:

• You fail to file your tax returns
• You miss a payment (if you do miss a payment you should notify the IRS ASAP)
• It is discovered that your installment agreement was filed under false pretenses

IRS Fees Associated With IRS Agreement Plans

The user fee for new installment agreements is $105 and $52 for agreements where payments are deducted directly from your bank account. Taxpayers with income at or below established levels, can apply for a reduced fee of $43. Information about requesting the reduced user fee will be included in installment agreement acceptance letter sent to individuals.

There is also a user fee of $45 for reinstating defaulted agreements or restructuring existing agreements. If you already have an approved installment agreement from a previous tax debt and your financial situation has changed, we may be able to modify or restructure your installment agreement to include additional amounts owed into one agreement.

Professional Help With IRS Payment Plans

If you don’t feel comfortable negotiating a debt payment plan with the IRS or aren’t’ sure if it is the best option for you you should contact a tax lawyer who has experience dealing with IRS. A lawyer with this experience can be helpful in the regard of knowing exactly what steps you should take because of your individual situation. They may be able to help you avoid a great deal of hassle and may help avoid additional fines and interest, or even such penalties that you may not be obligated to serve in the first place.

Tax penalties present taxpayers with unique issues to consider. Wilson v. Commissioner, T.C. Summary Opinion 2008-91, describes the situation where a tax attorney represents a taxpayer with a tax penalty that was imposed for a tax return prepared by the attorney’s firm. The issue that the case describes is the conflict of interest that the tax attorney has in representing taxpayers in this situation.

In Wilson, the taxpayers failed to report their Social Security income on their federal tax return. The taxpayers had their tax return prepared by Tax Help, Inc. The IRS sent the taxpayers a notice that it intended to increase the taxpayers’ tax liability to account for their Social Security income. The taxpayers submitted an amended tax return to reflect this income and the IRS assessed an accuracy related penalty. The taxpayers filed a petition to redetermine the tax, apparently, arguing that the penalty should be abated.

There are several defenses that taxpayers may assert to ward off accuracy related penalties. The most common defense is that there was no understatement of tax. If there was an understatement, another common defense is that the taxpayer acted in good faith in relying on a professional tax return preparer.

The U.S. Tax Court said that:

Petitioners failed to demonstrate reasonable and good faith reliance on their tax return preparer. In fact, at the trial petitioners’ attorney, who is also an accountant and employed at Tax Help, Inc., did not pursue this defense in any meaningful way but instead rested his case on [a] baseless contention…

The U.S. Tax Court also noted that:

Insofar as they might be indicative of the nature or quality of advice dispensed at Tax Help, Inc., petitioners’ attorney’s contentions tend to call into question whether the return preparer had sufficient expertise to justify petitioners’ reliance.

This is harsh language from the relatively reserved U.S. Tax Court. The issue that this raises is whether, given the facts described by the court, the tax attorney had an impermissible conflict of interest. As an employee of Tax Help, Inc., the attorney may have owed some duty of loyalty to his employer. As a tax attorney for the taxpayer, the attorney also owed a duty to the taxpayers as clients. The tax attorney’s duty to his clients is to be a zealous advocate for the taxpayers, which may have been muted by his duty to his employer. A tax attorney in this position may not be able to zealously argue that his employer was negligent.  An outside tax attorney would be in a better position to make this type of argument.

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In these difficult economic times, repaying the IRS is becoming harder than ever.  Installment agreements may be entered into in good faith, but while payments are being made, interest and penalties continue to run.  Every five years, interest and penalties double the original tax.  Most attempts to repay the IRS result in the amount owed increasing, not decreasing, because of this.

Very few people that owe money to the IRS want to be there.  For most, it is a life situation that puts them there - a failed business venture, divorce, medical problems.  But the weight of IRS interest and penalties often makes it impossible to get a fresh start - purchase a home, get remarried, start a new profession.  This economy amplifies the impact.

For those that are out of the system and who come forward, and for those that are in the system but are treading water, forgive interest and penalties if the tax can be repaid over an agreed upon payment plan.

This would bring people back into the system, close the tax gap and stimulate the economy by helping taxpayers get out of debt.

An IRS Tax Attorney will be able to help you escape the wrath of the IRS once and for all.

If you negotiate an installment plan that is not backed by the proper legal documentation, the IRS can continue to levy and lien your property and assets.

It is important that any agreement you enter into with the IRS is signed both by the company and by an IRS official.

You need the assistance of an IRS Lawyer.