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Giving Home > Professional Advisor Resources > Washington News > Tax Payment Plan Options

Tax Payment Plan Options

Published April 4, 2025

The Internal Revenue Service (IRS) reminded Taxpayers of the April 15 tax filing and payment deadline. If you are not in a disaster area, a combat zone or are living and working abroad, you are obligated to pay income taxes on April 15. If you do not pay your taxes on that date, you could be subject to interest and penalties.

Taxpayers should be certain to file by April 15, 2025. If you do not file, there is a late filing penalty that could be up to 5% per month on your unpaid tax amount.

If you are unable to pay in full, you should pay as much as possible by April 15. This payment will reduce the interest and tax penalty amounts. The current interest rate is 7% per year and the penalty rate is normally one-half of 1% per month. The IRS reminds Taxpayers that extending the filing date until October 15, 2025, does not extend the deadline to pay tax.

There are four basic plan options for individuals who are not able to pay taxes on April 15, 2025. These include a short-term and long-term plan, an offer in compromise and a temporary delay in payment.

  1. Short Term Plan — If your tax balance is less than $100,000, you may have up to 180 days to pay the balance in full.
  2. Long Term Plan — A long-term payment plan may be possible if you owe less than $50,000 in tax, penalties and interest. This plan typically involves monthly payments for as long as 10 years. The IRS suggests that Taxpayers should simplify the process by using an automatic bank withdrawal each month. The longer payment plan, however, will increase your interest and penalties.
  3. Offer in Compromise — Some Taxpayers may qualify for a reduced tax amount. You may check if this option is available with the Offer in Compromise Pre-Qualifier tool on IRS.gov. By entering the required information, you can understand whether or not you may qualify for a reduced payment.
  4. Temporary Delay — Taxpayers who are experiencing serious financial hardships may ask the IRS to delay the collection process. If the IRS determines there are major financial issues and the Taxpayer is unable to pay, the IRS may grant a delay in payment. The IRS will assess interest and penalties until the payment is completed.

The IRS reminds Taxpayers who are unable to make full payment that they are more vulnerable to fraudsters. The IRS does not call, text or contact individuals to demand immediate tax payment. The normal IRS collection process starts with a bill or letter that explains the tax obligation and how Taxpayers may question or appeal that amount.

Charitable Deduction 36 Times Purchase FMV Rejected

In Ranch Springs LLC et al. v. Commissioner; No. 11794-21; 164 T.C. No. 6, the Tax Court determined that a conservation easement based on an assumed 36-fold increase in value within one year was not correctly valued. Ranch Springs Investors, LLC (LLC) acquired property in December of 2016 for $6,500 per acre. After syndicating a partnership, in December of 2017, the LLC granted a conservation easement and claimed a charitable deduction of $25.8 million. The Tax Court determined the value of $6,500 per acre was correct, noting that the property was zoned for agricultural and residential use and not for a limestone mine, the probability of rezoning was remote, the value of the potential limestone mine was undetermined and the value of the easement was $335,500. The claimed easement value was 7,694% greater than the actual value. The 40% gross valuation misstatement under Section 6662(h) was applicable.

The Tax Court noted the fact pattern is "painfully familiar." The appraisal by Claud Clark III claimed the valuation should be through a discounted cash flow method for a limestone quarry that would operate for the next 35 years. Taxpayers did not prove that their property could be rezoned or that a limestone mine was financially feasible.

The property was in Shelby County, Alabama. It is classified as agricultural land and surrounded by several adjacent homes on one-acre lots. Property owners Tom and Bob Lewis were approached by Jason Rudakas and discussed the possibility of creating a syndicated partnership and conservation easement. They obtained exploratory drilling by AquaFUSION, Inc.

The average price of agricultural land in the county was $6,935 per acre. They did obtain a letter from a law firm that indicated there could be potential rezoning, but the "process is highly political and will turn on neighbor support/opposition." They obtained a signature on a letter drafted by Bob Lewis by former mayor Theo Perkins. The letter indicated that rezoning could be possible. However, at trial, Perkins testified that he simply signed the letter to indicate government officials would consider the application.

A limestone quarry also requires permits from the Alabama Department of Environmental Management (ADEM). The LLC did not apply to the county or to the ADEM for permits. The offering materials to investors claimed there would be charitable deductions of four times the investments.

Appraiser Clark stated there have been "no sales or transfers of the property in the last three years." This statement ignored comparable sales in the county. The property was purchased in December 2016. On December 28, 2017, Ranch Springs deeded a conservation easement to Heritage Preservation Trust, a Section 501(c)(3) entity.

The IRS permitted a $58,000 cash contribution but denied the charitable deduction of $25.8 million. Both the Taxpayer and IRS presented expert witnesses. Taxpayer appraiser Michael Wick assumed an operating limestone quarry with distributions over 28 years. IRS expert Andrew Sheppard explained that this was an "exploratory stage mineral property" and the value of the minerals therefore could not be determined. The agricultural value was $6,550 per acre and the resulting conservation easement after value was $335,500.

The IRS stated appraiser Clark was not qualified because he had "knowledge of facts that would cause a reasonable person to expect the appraiser falsely to overstate the value of the donated property." However, the court noted the IRS did not prove this at trial. The determination of a conservation easement value is the difference between the "before value" and the "after value." A comparable sale for $6,500 per acre was available, but Taxpayers claimed it was a distress sale and therefore not applicable. The court disagreed and rejected that claim.

The Taxpayer claimed that a discounted cash flow analysis was appropriate, and the property could have been rezoned. The Tax Court noted that "neighborhood opposition would likely have been intense” and rezoning was therefore not probable. In addition, there were other limestone quarries in the area that were operating at reduced capacity. There was a high probability that the limestone business would not have been successful.

The discounted cash flow appraisal method is useful for valuing an existing business but is not applicable for bare land that does not have any operating business. Because the claimed easement valuation was 7,694% of the actual valuation of $335,500, the 40% gross misstatement penalty under Section 6662(h)(2)(A) was applicable.

Estate of Deceased Son Must Pay Mother's Estate Taxes

In United States v. Leon W. Lipson et al.; No. 2:23-cv-00127, the IRS attempted to collect the taxes due on the estate of Jean Lipson. The initial valuation of approximately $3 million caused her son David, as personal representative, to take several actions to reduce the taxable estate. On the estate tax return, David reported the estate value at approximately $2.4 million and total tax due of zero dollars.

The IRS issued a notice of deficiency. The Tax Court determined the estate value was approximately $3.7 million, there was a tax deficiency of $566,041 and a penalty of $75,350. Executor David Lipson requested an extension to pay. David passed away in 2019 and his brother Leon Lipson became the personal representative of the estate.

The IRS and Taxpayer both moved for summary judgment. The Taxpayer claimed that the IRS tax collection was barred by a six-year statute of limitations. However, the Tax Court determined there is a 10-year statute of limitations under Section 6901 on any transferee or fiduciary who may owe tax.

The IRS had filed Form 4340 to describe the assessment, and the court deemed that this form was correct and filed before the 10-year period expired. Therefore, the claim against the Jean Lipson estate was timely.

A second IRS claim was on a trust created by Jean Lipson. Leon was successor trustee and had a fiduciary duty to administer the trust in accordance with its terms. Therefore, the trust provision requiring it to transfer funds to the estate to satisfy the tax obligation is enforceable.

Nadine Lipson is the spouse of decedent David and personal representative of his estate. The evidence indicated that David transferred assets to a partnership and rendered the estate insolvent. In his request for an extension to pay tax, David noted the estate was "without liquid assets to pay the amount owed." Because David was a CPA and tax attorney, the Taxpayer claim that he had no knowledge of the estate tax obligations was deemed unlikely by the court. He transferred the estate assets and therefore his estate is subject to liability for the tax.

The fourth claim was whether spouse Nadine would be liable for David's transfer of assets to render the estate of Jean Lipson insolvent. Nevada is a community property law state, and would be applicable for assets of David and Nadine. To be liable for the debt, she does not need specific knowledge of the wrongful acts by executor David. Therefore, her community property assets are subject to the tax liability.

Therefore, the Tax Court determined that the estate of Jean Lipson, the trust of Jean Lipson, the estate of David and Nadine are all liable for the estate tax and penalties.

Applicable Federal Rate of 5.0% for April: Rev. Rul. 2025-8; 2025-15 IRB 1 (17 March 2025)

The IRS has announced the Applicable Federal Rate (AFR) for April of 2025. The AFR under Sec. 7520 for the month of April is 5.0%. The rates for March of 5.4% or February of 5.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2025, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”