When negotiating with the IRS one of your options is an installment agreement. Basically, the installment agreement is just like your home mortgage, you don’t pay the whole thing at once, you make smaller payments along the way over a number of months. A number of factors play into the amount you will have to pay on your installment agreement. The first is the amount you owe. If you owe under $10,000 you can select any payment amount so long as your tax will be paid within three years and you will not have to provide any financial information. If you owe more than $10,000 but less than $25,000 the IRS still will not need to see any financial information, however the debt (along with penalties and interest) will need to be paid off in 3-5 years.
If you owe more than $25,000 you will be required to provide financial information to the IRS over the telephone or by mailing in your Form 433-F. The IRS will then look at your income and expenses to determine what they believe you can afford to pay every month. The interesting thing is that they do not look at your actual expenses in most cases, but rather a national standard that is often times much less than your actual expense.
If you need help negotiating an installment agreement, please do not hesitate to send me an e-mail or give me a call and we can discuss how I can help.