Ounce you make a payment plan with the IRS. How long is it in effect for?

Question

I owe for back taxes, but with the payment plan I'm on I will pay to the day I die and still won;t come close to the total amount owed. How long will I be on this payment plan? Does the IRS refile every 10 years?

Answer 1

It's in effect until either it's paid off or you are no longer in effect. If you can afford to pay more toward owing for the back taxes I would try contacting the IRS and seeing if you can work out something else with them so that you can pay it off while still alive. But, of course, once you're deceased you're no longer responsible for the debt, your estate is.

I have attached a link regarding installment agreements and being able to pay off the debt partially.

Answer 2

I’m not sure what you mean by will the IRS refile in 10 years. What you say can’t be true, installment agreements are designed to full pay all back tax liabilities at least 90 days before the collection statute expiration date. Pepsilime offers a good link to the IRS website, if you don’t understand call the IRS or stop by your closest office. If you pay as much as you can, as soon as you can, as often as you can, you will pay the least overall. Probably the only way to make this problem go away is to throw money at it. Some others have suggested you call the IRS and increase you payment with them. This is not a good idea because at a minimum you will be charged a $45 fee to restructure. If later you can’t afford to make the new payments you will be charged another $45 fee to restructure again. Best option is to pay extra every month, if you do this there is no fee and you will be paid ahead if you have to skip a payment sometime in the future.

There are only four ways that I know of to pay less than the full amount; bankruptcy, offer in compromise, collection statute expiration, partial payment installment agreement.

Bankruptcy
Chapter 7 bankruptcies will wipe out tax debt if the balance is old enough (at least 3 years old I think).
Chapter 13 bankruptcies will not wipe out the debt unless the bankruptcy plan full pays all creditors. While under the protection of a bankruptcy trustee the IRS must stop all penalties, interest and collection action. The IRS can’t even accept voluntary payments for the years in the plan (while in a chapter 13 plan you can’t pick which debts you will pay, the trustee does). When you emerge from the plan you will still owe the IRS the same amount you did before minus the payments the trustee made on your behalf. While you are not debt free with the government, now you can afford to make an agreement to pay your back taxes.

Offer in compromise
Don’t believe the late night TV commercials on this one. With an OIC you make an offer to the government where you will make a lump sum or payment arrangement for less than the full amount. If your offer is accepted you will have to agree to filing and paying your taxes on time for the next 5 years or the IRS will void the OIC. With the lump sum type (can be up to 6 payments) you have to make a down payment of at least 20 % of your offer. With the monthly payments type you must make the payments you propose while IRS is considering your offer. With either type IRS can take up to 2 years to decide to accept or reject the offer; if they reject your offer they keep your payments or down payment and apply it to your tax debt. I have seen newspaper articles that say the acceptance rate is 16% so IRS is very conservative about accepting OICs; if it is a deal you wouldn’t take, the government won’t take it either. Even if you would take the deal the government probably won’t. Current thinking in congress is all taxpayers should pay the full amount they owe the government.

Collection statute expiration date
The IRS has 10 years from the due date of the return or 10 years from the time you file if later to collect back taxes. Once the CSED had run out the taxes automatically fall off the taxpayer’s account. Some things extend the CSED such as chapter 13 bankruptcy, offers in compromise, amending your return, or the taxpayer waiving the CSED. While the IRS won’t tell you when the CSED occurs, they will tell you when the return was filed and you can figure it out for yourself.

Partial payment installment agreement
With this plan you only have to pay for 5 years then anything left is forgiven. In order to qualify you must prove you can’t afford to pay. You will fill out a form similar to a loan application called a collection information statement. They will then verify what you put on the CIS with what was on your last tax return and what 3rd parties have reported to IRS (banks, employers, mutual funds, etc). You will have to give them most of your income when they calculate your payment and this may force you into bankruptcy because they won’t allow anything for unsecured debts such as credit cards or unnecessary expenses, but after 5 years it’s over.

Answer 3

There isn't enough information to answer your question.

I would have to see the agreement...if you waved your rights to the 10 year limit (which the IRS is usually good at including) then you are stuck with it until it is paid. Unless, you can get them to accept an Offer in Compromise.

But, be warned these are very complex forms to file...and there are no guarantees.

There might be another option...not that I would not suggest it without knowing the entire situation. If it is actually back Income Tax then a bankruptcy would forgive it too. However, if it is a trust fund tax (such as withholding taxes for your employees) this isn't even an option.

But, IF your agreement didn't include a wavier of the 10 year rule...then they have 10 years to collect the money. I highly doubt the agreement didn't address this though...but, weirder things have happened.

I would highly suggest that you talk to a local professional that is an Enrolled Agent or a CPA that specializes only in taxation.

Answer 4

You can ask for a new payment plan if you can bring new evidence, something that will show that you cannot afford the current plan. For instance, your income has changed drastically, or your assets are no longer what they were when the payment plan was agreed upon, or you have become disabled.

Answer 5

I would think you will be on the payment plan until you either pay off the debt or until they decide to increase it and then you pay it off. You can pay more if you can to get it paid off.

Answer 6

It's in effect until you pay it off. If you die first, then the balance will be paid from your estate, if any, before any of your heirs get anything.

Answer 7

It's in effect until paid in full.