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I am efiling a client's return who will need to send in an instalment request with his first payment. I rarely if ever prepare one of these and am assuming he sends in the agreement with his Form 1040-V. Is this correct ?

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Sending IA requests in with tax returns goes through *eventually* but it can take several months (pre-craziness) before the first payment is taken.  Might be best to set it up online.  Perhaps others can chime in with how fast those kick in.

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In the current climate I'd think the best course of action would be to wait for the assessment before requesting the IA.  Getting the IA online in response to an assessment letter would be the most reliable method of confirming the IA has been set up.

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On 5/2/2021 at 2:48 PM, JohnH said:

In the current climate I'd think the best course of action would be to wait for the assessment before requesting the IA.  Getting the IA online in response to an assessment letter would be the most reliable method of confirming the IA has been set up.

Sounds like the best procedure this year is to send the first "installment" payment with the return, and have the client make monthly "installment" payments online via Direct Pay.  Then get the real agreement going online once they get the assessment.  A new twist on "fake it till you make it!"

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2 hours ago, Matthew in the PNW said:

Sorry, I'm not sure since we don't recommend those for clients. No savings, a lot of hassle, and if they miss a payment they seem to get kicked off their own payment agreement.

Most people needing installment agreements aren't looking for savings.  They're looking for sound financial guidance from their tax preparer whom they trust to guide them in dealing with an unexpected tax liability.  They're often trying to dig out of a hole while avoiding borrowing from their credit card or a few other sources at incredibly high rates. For them, the I/A is a life saver, and at a very reasonable effective interest rate when compared to other choices they may have.  ("effective interest rate" = the interest plus a FTP penalty combined).  Plus, it doesn't affect their credit record or available lines of credit.  But yes, they do have to actually comply with the terms they agree to or else they can find themselves in hot water.  

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Not to take away from the focus of the post...

The 1/2% savings compared to the $35 (?) fee to set one up doesn't make sense to me financially, and I figure those clients probably already have been credit. I believe the $35 fee is reassessed every time the client breaks the agreement isn't it?

I figure charging them a fee to help with this typically doesn't make sense. If they don't have the money now, they will likely miss a payment again and be back at square one.

A lot of assumptions on my part. 

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I hate those that took a withdrawal from their IRA to pay their balance due and then, of course, find out the hard way what that does to their income and taxes year and want to withdraw from their IRA again until I have The Talk with them.

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On 5/4/2021 at 1:55 PM, Lion EA said:

You do get a lower interest rate with an installment agreement, or maybe it has to include direct debit to get the lower rate.

You get a lower set up fee for having direct debit, not a lower interest rate.  It is always substantial difference and it keeps changing.  At one point it was $45  vs $225.  Also, if amount due over $25,000 , it has to be direct debit.

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On 5/4/2021 at 6:55 PM, JohnH said:

But yes, they do have to actually comply with the terms they agree to or else they can find themselves in hot water.  

A colleague who does a lot of these talked once about his frustration seeing the same folks come back every two or three years with the same bleeping problems.  Not filing, missed a payment and killed their IA, not making ES pmts, we all know the type.  An older man at his firm said to him, "You just need to look at them differently.  Instead of calling them "problem clients" instead see them as "walking annuities!"

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We have a longtime EA here in Oregon whose practice is mostly dealing with OIC and IA. She insists on all of her fees to be paid in advance.

We also have a local tax attorney with several EAs on his staff who also mostly deals with OIC and IA. he asks for a sizable retainer up front.

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30 minutes ago, Catherine said:

A colleague who does a lot of these talked once about his frustration seeing the same folks come back every two or three years with the same bleeping problems.  Not filing, missed a payment and killed their IA, not making ES pmts, we all know the type.  An older man at his firm said to him, "You just need to look at them differently.  Instead of calling them "problem clients" instead see them as "walking annuities!"

I'd rather walk someone through an I/A any day than fill out an 8283 (for example). 

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4 hours ago, cbslee said:

We have a longtime EA here in Oregon whose practice is mostly dealing with OIC and IA. She insists on all of her fees to be paid in advance.

We also have a local tax attorney with several EAs on his staff who also mostly deals with OIC and IA. he asks for a sizable retainer up front.

I won't touch ANY representation work without a retainer (unless I'm willing to do it pro bono).  They are already proven to be fiscally irresponsible, so if I respect my own time and expertise, I have to get that retainer.  It's also an excellent way to weed out the ones who are not going to follow through.  Once they've handed over money, they are invested in the process - which makes it worth my while to dive in to the work.  

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