For a number of months since the COVID-19 pandemic struck, the IRS has offered installment agreements of up to $250,000 without the need for the taxpayer to submit a financial statement (IRS Form 433) to the IRS. However, the availability of this expanded installment agreement was not well publicized. The IRS has now publicized the availability of this expanded installment agreement, insuring that taxpayers and tax professionals can now factor this expanded installment agreement into the tax resolution options now available to a taxpayer. Historically, for tax debts exceeding $50,000 and later $100,000, the IRS required the taxpayer to submit a detailed financial statement and negotiate the installment agreement, which can prove to be difficult and time consuming.
But the recent IRS published guidance now confirms the $250,000 installment agreement. “The IRS is easing paperwork requirements to allow individuals more flexibility to get non-streamlined Installment Agreements up to $250,000 without financial verification, if their case is not yet assigned to a revenue officer.”[1]
However, there is a limitation on the uses of this new, expanded installment agreement. The expanded installment agreement must be entered into before the account is placed for collection with an IRS Revenue Officer. If the account is placed for collection with a Revenue Officer, the taxpayer may be limited to a $50,000 streamlined installment agreement unless the taxpayer provides a financial statement.
In addition, the IRS typically files a Notice of Federal Tax Lien when the taxpayer owes such large delinquent tax amounts. However, the IRS has further announced that for tax year 2019 only, it will offer installment agreements of up to $250,000 with no tax lien filed.[2]
Practice point: For delinquent tax amounts that exceed the typical IRS streamlined installment agreement and thus require the taxpayer to submit a detailed financial statement and negotiate with the IRS, the IRS’s expansion of the dollar limit is a significant time, cost and hassle savings for the taxpayer. However, the taxpayer needs to be proactive in pursing the installment agreement before his or her account is assigned to an IRS Revenue Officer for collection. Once assigned to a Revenue Officer, the taxpayer will have to submit the financial statement and negotiate the installment agreement.
Taxpayers with outstanding tax liabilities are encouraged to contact Jared Le Fevre to discuss eligibility for an installment agreement or other tax resolution method.
Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
[1] https://www.irs.gov/about-irs/irs-offers-new-relief-options-to-help-taxpayers-affected-by-covid-19 (accessed November 15, 2020).
[2] Id.