Why we don’t like compiling full financials
When you owe a high amount to the IRS, they are going to audit your ability to pay. The IRS wants to make sure that you aren’t sandbagging your assets or income. So a collection information statement (Form 433-a, 433-b, or Form 433-f) is required to be completed, under penalty of law.
This is a problem. For some people, if they show a financial statement, the IRS will impose a higher installment agreement which may be difficult or impossible to keep up with. The temptation exists for taxpayers to lie, but that can have its own disastrous consequences. People have gone to jail for submitting a fraudulent collection information statement.
A lot of the work and value we provide comes from creating financial collection statements that are both true and accurate and also based in reality. This way, we are able to negotiate a repayment deal that our client can actually afford. That is, we can implement a plan that actually ends the problem.
It is much easier and much less expensive for taxpayers who owe money to the IRS if we don’t have to get into the entire collection information statement.
Which is why we like the IRS Streamlined Installment Agreements. No financial statements are required!
Streamlined Installment Agreements, historically
Years ago the Streamlined Installment Agreements were capped at $25,000 or less. If you owed over that you had to submit full financials. Fortunately, the IRS increased the threshold to $50,000. If you had a tax debt under $50,000 and got into a direct debit agreement, you didn't need your "full financials" plugged into the IRS collection statement.
Also, the IRS won’t file a Notice of Federal Tax Lien. This is a huge benefit – A federal tax lien will knock your credit score down 100 points.
The IRS is expanding Streamlined Installment agreement to tax debts over $50,000 but below $100,000.
Now, there is news on October 4, 2017, that the IRS has increased the threshold once again. For taxpayers owing over $50,000-$100,000, they can get into a streamlined installment agreement. And not just 72 months, but *stretch-pay* the debt over 84 months. That’s seven years!
There are some downsides to the over $50,000 Streamlined Installment agreement
Seven years is a long time to repay a debt. If it will take you seven years to repay the IRS, maybe you want to investigate submitting an Offer in Compromise.
A Federal Notice of Tax Lien will be filed. Honestly, this stinks. Ruining someones credit with a tax lien when things are already tight isn’t really helpful to anyone. I don’t see how it helps protect the government. Ruining someone’s ability to borrow is a guarantee they will never be able to borrow money to pay you back, right?
Note: This is not to say you can't avoid having a lien being filed if you owe over $50,000. It is just that you can't use the Streamlined Installment Agreement to achieve this.
You do have to pay back the debt before the tax debt expires; this is known as a CSED. Typically the IRS has ten years to collect on a debt before the time to collect expires. Our experience is that many people procrastinate when dealing with the IRS, so we aren’t sure how many people will be able to take advantage of this enhanced streamlined program. (Read more about CSEDs here).
If you are assigned a Revenue Officer, the IRS tells us the Revenue Officer cannot place you into a streamlined installment agreement if you owe over $50,000. You will have to submit full financial information.
Tax problems are hard — start with plan
When you are facing a tax debt it is easy to get overwhelmed. It is easy to procrastinate. And yet, it is also easy to panic. We refuse to let our clients deal with this nonsense alone. That’s why we recommend starting off with a Tax Tax Diagnosis. We will give you a real-time report of what the IRS claims, and deliver you a fairly bullet-proof plan of action for success. All for only $750. Learn more about the Tax Tax Diagnosis here.
If you're not sure what step to take next, call us at 888-727-8796 or email firstname.lastname@example.org to schedule a complimentary consultation with us. We can help.
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- The IRS tested the new threshold in 2016; the October 4, 2017, announcement extended the $50-100K threshold.
- If an 84-month streamlined Installment agreement would extend past the CSED, you can shorten up the time so it will be paid back in the CSED.
- Source: https://www.irs.gov/businesses/small-businesses-self-employed/streamlined-processing-of-installment-agreements