Although the IRS can be a difficult and unfriendly organization to deal with, they are also very logical and practical. They know that they can’t collect money that isn’t there, which is why they allow taxpayers to pay off their debt over time. This form of tax resolution is often the easiest and most effective way for the IRS to collect all the money they are owed.

Installment plans are a practical way to resolve the tax debt that works well for both the IRS and the taxpayer. Though you will typically have to pay additional fees in the form of penalties and interest, setting up a payment plan is a tax resolution option that can get you back on a track and eventually free you of your tax burden.

An installment agreement is referred to as either formal or informal, with the main difference being the time the balance is paid off.

• Informal installment agreement- the taxpayer agrees to make monthly payments in an amount which will clear the tax debt over the course of two years
• Formal installment agreement- a written agreement where the taxpayer agrees to make, and IRS agrees to accept, monthly payments in a stated amount

It’s important to note that a taxpayer can designate payments, such as against the trust fund portion of employment taxes, under an informal installment agreement but not under a formal installment agreement.

When it comes to IRS collection personnel, they are typically understanding people. If an IRS collection agent arranges a taxpayer’s installment payment at an amount that the taxpayer’s legal representative feels is unreasonable, the representative can discuss this with the collection agent’s supervisor. If the legal representative is unable to renegotiate the unreasonable amount, they can escalate the case to the IRS office of appeals.

The IRS provides many options for resolving an overdue tax liability. At Five Stone Tax Advisers, our goal is to get you the best possible outcome. This means setting up a payment plan that allows you to pay off the tax debt in the shortest amount of time and keeps penalties and interest at the least amount possible.