Will a Full Pay IRS Installment Agreement Stop IRS Collection?
Oct. 27, 2021
What Is an IRS "full Pay" Installment Agreement?
Most individuals with IRS debt will qualify to make payments on the IRS debt over time. The IRS typically calls these "installment agreements".
There are IRS installment agreements that only pay a portion of the IRS debt before the IRS collection statute expiration date expires barring the IRS from collecting the remainder. (partial pay/ability to pay/non-collectible status arrangements)
There are also installment agreements that pay the full amount of the IRS debt, before the IRS collection statute date expires.
Which one the taxpayer proposes, will depend on that taxpayer's situation.
Some taxpayers don't qualify to settle the IRS debt or use a partial pay/ability to pay/non-collectible status arrangement. The taxpayer typically is making too much money to qualify and/or is trying to protect assets.
Will the IRS Actually Try to Collect the Debt via Levy or Garnishment?
If the taxpayer ignores the IRS and it's "final notice" warning, the IRS will garnish wages and attempt to levy bank accounts and other assets. Taxpayers are often surprised when the IRS does this....but it does it in almost every instance where it's ignored.
How to Prevent IRS Collection with A Full Pay Payment Plan
There are 4 steps that the taxpayer must take to prevent IRS collection of an IRS debt.
Compliance for purposes of dealing with the IRS means a few things. First, it means that the taxpayer has filed all required tax returns. Second, it means that the taxpayer has made certain, recent estimated payments (pre-payments in an attempt to ensure less liability at the end of the year).
The taxpayer needs to propose a legal alternative to IRS collection. There are several potential alternatives. Which alternative the taxpayer proposes will depend on the facts of the taxpayer's "case".
It may also depend on whether the taxpayer can legally arrange or re-arrange the facts in order to make a proposal "better". For instance, the taxpayer may need to start making payments on federally guaranteed student loans in order to keep the student loan from defaulting. Setting those payments up may provide the taxpayer a side benefit in the form of a better legal option in relation to the IRS debt.
In order for the taxpayer to know which legal option is best or may be best with some "planning", a complete analysis of the taxpayer's IRS debt, history, income/budget, assets, etc. should be undertaken by someone who is very familiar with IRS rules and laws.
A taxpayer may not know/understand whether a "full pay" installment agreement is the best option without undertaking this type of analysis.
In most situations, the taxpayer must prepare certain documents, often signed under the penalty of perjury, and supply those documents to the IRS. These documents must be carefully prepared as the information placed in them must align with the facts.
The IRS won't create a solution for the taxpayer, unless you consider a solution to mean asset seizure and/or wage garnishment.
The taxpayer must approach the IRS and propose a solution. The IRS will take the proposal under consideration, review the history and items provided, and make a determination.
Depending on the circumstances, this proposal may be reviewed while the taxpayer is on the phone with the IRS or the review may last months.
In any event, if the proposal isn't made, the IRS will take the position that it's still in collection mode and will continue down the path of levy/garnishment.
A payment plan proposal will stop IRS collection.
A full pay proposal will stop the IRS collection machine more readily, as qualification for a full pay installment agreement is typically easier and the review process by the IRS is much faster.
Any taxpayer with serious IRS debt should ask an experienced tax resolution professional to help them become "compliant" and determine which path is best to deal with the debt.
If the professional's determination is that a "full pay" payment plan is the best option, the professional should be willing to explain the process necessary to obtain this type of payment plan, and how to use it to ensure that IRS collection activity has stopped.