If you owe the IRS over $25,000 there is a installment payment plan you can use. The repayment plan will include the outstanding taxes, any penalties and interest payments. With owing this amount of tax there will be a fair bit of paperwork you will need to do, the main one being the Collection Information Statement.
As with any IRS process you must begin with a form to apply for a installment payment plan. The IRS will consider your application primary based on the information you provide in the Collection Information Statement. Quite often the IRS will ask for additional information based on what you have or have not provided in these required forms.
The Collection Information Statement does ask for a lot and detailed information on your financial situation. This information includes your income, expenses, assets and investments. By providing this information to the IRS you are providing them with a good insight into where you may have assets, cash or investments that they can target if you default on your repayment plan or do not pay taxes into the future, you have basically saved them a lot of work in investigating you.
The Collection Information Statement is the basis of how the IRS will determine what will be your installments per month. The IRS will basically work out your mandatory expenses per month against your income and they will target what is left over. In determining what is a mandatory expense the IRS will be a whole lot more hardnosed about that than you would be, so be prepared for this, as it will probably shock you.
The IRS will basically have a formula that says food is a certain amount each month. If you are exceeding this they don’t care, you need to come to the same spending amount that they do, in order for you to meet your repayments. Credit card repayments are also deemed to be non mandatory.
Now you do not need to negotiate directly with the IRS, there are many certified professionals that can do this on your behalf. It is important to draw on their skill, knowledge and experience as the decision the IRS makes will affect you for many years. You want to ensure that the IRS budget they set you is achievable and livable. The people that can help you are attorneys, CPS’s, enrolled agents.
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