Installment Agreements (IA) are the most common IRS resolution strategy. IAs allow both business and individual taxpayers to pay their taxes over time while maintaining their sanity and living ordinary, but not extravagant lifestyles.

Case study: Taxpayer works for railroad and pays railroad retirement tax, rather than social security. IRS computers are not set up to handle the increased tax rate resulting in higher estimate of taxpayer’s ability to pay. Tom Ryder successfully negotiated an installment agreement reflecting taxpayer’s actual ability to pay.          

Individual taxpayer had not filed taxes for many years. Somehow his federal income tax withholding had been adjusted to allow accrual of substantial tax liabilities. Since the taxpayer hadn’t filed, the IRS had filed substitute tax returns on his behalf and begun collection efforts including wage garnishment.

Taxpayer hired Tom Ryder’s firm after getting a wage garnishment order. Mr. Ryder coordinated with the accountant to file missing income tax returns. Meanwhile, the IRS had issued a lock-in letter to the employer to only allow one personal exemption and filing status single. This prevented the taxpayer from accruing future income tax liabilities.

It appeared the taxpayer would qualify for an Offer in Compromise to settle his case for less than the amount owed. However, after nearly two years negotiation, the IRS rejected the taxpayer’s OIC; so he needed to negotiate an Installment Agreement. Bankruptcy was not an option since he could not discharge the substitute tax returns, which comprised the majority of his liability.

Tom Ryder negotiated an installment agreement of $300 per month, which the taxpayer could afford while maintaining his sanity. Unfortunately, after two years making IA payments, the IRS proposed termination of the Installment Agreement and requested updated financial information. The taxpayer submitted updated information, but the Collection Division only allowed half of his tax withholding. He gets paid bi-weekly, but the IRS only allowed two weeks of tax withholding, rather than a complete month. Mr. Ryder submitted verification of tax withholding and requested consideration by the Appeals Office. The case is still pending in Appeals, but hopefully will be resolved in the taxpayer’s favor.