IRS Law Blog

Normally, IRS installment agreement rules require you to give them your financial information to get a payment plan.  However, the IRS has been steadily allowing higher amounts to be owed to still get an installment agreement without financial disclosures.

Now, if you owe the IRS as much as $250,000, you can get an installment agreement without revealing your financial information.

This means you can owe the IRS a large tax debt and still keep them in the dark on your finances. The installment agreement without financial disclosures can be valuable if you are a high-income earner, have valuable assets, or lifestyle expenses you would rather not tell the IRS about.

There are three main qualifications to get an installment agreement on up to $250,000 while maintaining your financial privacy:

1. You owe the IRS income taxes.
2. Your file has been assigned to the IRS Automated Collection System.
3. Your monthly payment will repay the IRS within the time they have to collect from you.  This is called the statute of limitations on collection.

If you meet these three qualifications, the benefits to you include:

• Not telling the IRS where you work and how much you make.
• Not telling the IRS about your lifestyle and how you spend your money.
• Not telling the IRS where you bank and the amount in your account.
• Not telling the IRS how much you have saved in a retirement account.
• Not telling the IRS what about your house, car, and how much they are worth.
• Not giving the IRS your financial records, including the normal requirements of providing your last three months’ paystubs, proof of your monthly living expenses, bank account statements, and retirement account papers.

You will also avoid the normal IRS installment agreement rules that make your payment amount dependent on the IRS Collection Financial Standards.  The Collection Financial Standards put you on a strict living expense budget, limiting your lifestyle and the IRS insisting you pay more than you can afford.  For example, if you spend $3,200/month on housing and utilities, and the IRS Collection Financial Standards limit that expense to $2,000/month, a $1,200/month difference.  The IRS will then dictate that your installment payment be $1,200 higher than your budget as your housing is more than what they will allow.

Keeping your finances away from the IRS also eliminates pressure on you to sell your assets to pay them.  For example, if the IRS found out your house had equity in it to pay them, they could demand that you sell your house and pay them rather than giving you an installment agreement.

If you can make monthly payments to  pay your taxes before the statute of limitations on collection expires, you do not tell them about your earnings, lifestyle, savings, and valuable property.  And they can’t take what they do not know about.

If you qualify, your installment agreement will be automatically calculated without reference to your finances.   The amount you pay will not be dependent on normal IRS installment agreement rules that can create problems for you and make you pay more than you can afford.  You will not have an IRS demand to sell off assets to pay them.

These are sensitive matters, understanding how to get the IRS to give you payment terms while telling them nothing.

So, you meet the qualifications and you want the benefits. Here are the next steps to set-up an installment agreement without disclosing your finances: 

• Verify the amount you owe without waking up the IRS.  This can be done by calling the IRS Automated Collection Service, but that will result in you speaking with an IRS collection agent, who will immediately start asking you questions about your finances. IRS agents are trained to put you on a deadline and action plan when you call.  This can be avoided by getting your information in a low key manner from the IRS Practitioner Priority Line (PPL).  The PPL is a convenience the IRS offers to attorneys and professionals to get background information about their clients without speaking to collection agents.  The PPL is not staffed by collection agents, but rather IRS employees whose job is to provide information, not get it.  They are not affiliated with the collection division and have no ability to hurt you.
• If you owe the IRS more than $250,000, consider choosing to pay your balance down to qualify.  The IRS will permit a voluntarily payment to be made to reduce your balance to pre-qualify.  Paying the balance down may be better than sharing your finances with the IRS, especially if you have high-income and assets of value.
• Understand that you can owe more than $250,000 and still qualify.  The IRS has specific rules for how they calculate the $250,000 that do include adding penalty and interest accruals.  That means you can owe the IRS $275,000, but if $25,000 of that is penalties and interest, you would qualify for the $250,000 limit.   You would still have to pay the $275,000 back, but would qualify for the agreement on owing under $250,000 without the penalty and interest accruals.
• Determine your statute of limitations on collection.  The IRS has 10 years to collect a tax debt from you.  The 10 years starts with the date you first owed them, which is when your tax return was filed and processed by the IRS.   To qualify for an installment agreement on up to $250,000, our monthly payment will need to pay the IRS back within the time they have left to collect.  The IRS give us records to calculate how much time they have left so we can determine the amount of your payment.
• Prepare to contact an IRS Automated Collection Service (ACS) agent for your installment agreement.   ACS is an IRS call center that handles a large volume of taxpayer phone calls.  ACS sends out automated collection letters, and then fields the calls in response.  You will never speak to the same ACS agent twice. It is likely the IRS will want your monthly payment to be made by debit out of your bank account.  To do that, IRS Form 433D, Installment Agreement, will also need to be prepared and provided to the ACS agent.

If you owe the IRS up to $250,000 and can pay it back monthly, strong consideration should be given to requesting an installment agreement that does not include the sharing of your finances.  You will avoid the harsh rules the IRS uses to calculate your payment amount and having the IRS learn about your valuable assets.  Your installment agreement will be automatic and will not be reviewed again if you make the payments, file, and pay your future taxes.

Sometimes, the IRS does not need to know.