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More
and more taxpayers are finding themselves in serious trouble as a
result of making a commitment which they later cannot keep, whether
it be a repayment agreement made on tax or non-tax liability. Part of
the problem lies in the priorities and temptations inherent in cash
management: often, for example, there is a false sense of cash
availability because only net payrolls are paid. Further, trade
creditors can often be induced to repeatedly extend payment terms
because they are afraid of losing an account or the money owed on
that account. Unlike trade creditors, however, taxing authorities
have real clout when it comes to enforcing collections.
Both
the state and the IRS have informal payment plans that are available
to most taxpayers having a reasonable compliance history. In the case
of the state, a 3-4-month payment plan is generally offered to pay
the entire past due-tax. In the case of the IRS, a 5-6-month plan is
usually available. Informal installment agreements are usually made
by telephone where the representative may not be authorized to offer
payment plans that exceed the time limits indicated above. The
taxpayer may feel forced to accept the payment arrangement offered.
Such an arrangement does not take into consideration the problems and
circumstances facing the business involved.
As
a result, taxpayers may enter into an unrealistic payment agreement
because of optimism or the desire to take off the heat. This starts a
time bomb ticking.
After
the taxpayer agrees to a payment plan, the tax account is monitored
and supervised by the taxing authority. There is a distinct change
from normal account handling procedures. When a payment or payments
are missed, the system is set to initiate enforced collection actions
and the time bomb explodes. In certain instances, for example, when
the taxpayer is not current on forward-going payroll taxes, a seizure
may be difficult, costly or impossible to avoid. When there
is a default on a payroll tax installment agreement, the authorities
generally begin talking of asset seizures.
Do
not commit to a repayment plan that you are unsure it can be
maintained. The key elements to aproperly
negotiated Installment Agreement is one that will allow payment of
the outstanding tax liability over the shortest period of time
without distracting from the ability to pay current taxes and other
necessary and required day-to-day expenses. Remember,
a default will occur if you aren't timely in making current tax
payments as well as those payments required by the installment
agreement.
Creativity
and foresight are essential characteristics for anyone negotiating on
your behalf. The periodic amount to be paid under an
installment agreement can vary with the cash flow nature of your
business. Taxpayer Advisory Group will provide the IRS with a carefully drafted
and detailed analysis of your financial condition and cash flow in
order to negotiate an Installment Agreement that will be acceptable
to the IRS and one that can be afforded.
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