IRS Installment Agreement Interest Rates Guidelines
If you are working to settle your tax debt with the Internal Revenue Service (IRS), you may see an installment agreement as a viable and appealing option for helping you repay your debt. An installment agreement allows you to pay the IRS back over an extended period of time, rather than in one lump sum. It is similar to a credit card payment, in that you make monthly payments over the course of several years until the debt is eliminated. Also, like a credit card, it is important to remember that you are still responsible for any penalties and interests that you have accrued, so you should factor that in when you are making decisions about repayment.
Here are some facts about how the IRS calculates the interest on your tax debt:
- Interest (and penalties) are charged on any unpaid debt until the entire balance is paid back.
- Interest on your tax debt accrues each day.
- The interest rate used is calculated every three months, meaning it can change as time goes on.
- Interest stops accruing as soon as the balance is paid in full.
Installment Agreement Payment Options
So, not only are you responsible for paying the amount you originally owed the IRS in unpaid taxes depending on the total amount due, you could also be responsible for a sizable amount in interest and penalties, though you will not be subject to wage garnishments, levies and other collective actions. You’ll want to factor this in when you are making your appeal to the IRS for the installment agreement to be sure that the monthly payments you end up with are affordable for you and your family. The IRS essentially tries to let you set the monthly payments, provided the payment is high enough. Your goal is to establish a payment high enough to pay off the debt, but not so high that you have to default.
In addition, the more you owe the IRS, the more financial information they will require from you in order to approve an installment agreement.
For a frame of reference, if you owe less than $10,000, your installment plan will very likely be approved as a “guaranteed” installment agreement. Under this type of plan, as long as you pay off your balance within three years, there is no specific minimum payment required. However, if your balance is over $50,000, you will be required to provide detailed information on your investments, assets, income and bank accounts and your payment amount will be under more scrutiny.
Get Help With Your Installment Agreement Request
If you’re planning to move forward with a request to the IRS for an installment agreement, you might consider partnering with an established and reputable tax firm that specializes in working directly with the IRS on their customer’s behalf. Success Tax Relief can review all of your tax returns and make sure that you know exactly how much you owe in taxes, penalties, and interest. We can also help you establish a reasonable payment plan that can eliminate your debt but not cause you to default on your agreement. Call our team today at 877-825-1179 for more information.