Owe Money to the IRS? Here’s How to Set Up a Payment Plan
There is no question about it…tax time can be stressful, especially during these very difficult economic times. If you are concerned that you will owe the IRS money and are not sure how you will be able to make the payment in one lump sum, you should look at all of your options.
While it is always best to pay as soon as possible (and in full) to avoid interest and penalties that add up, this is not always feasible. The IRS accepts checks, money orders or even a credit card, so there are various methods of payments you can use to pay in full. But, did you know that if you are unable to pay your balance in full, you can apply for a payment plan (called an installment agreement) that can allow you to pay the IRS back over time?
IRS Installment Agreement: Is It an Option for You?
It is a safe bet that you might think that paying your tax bill over time is easier and more realistic than finding a way to pay it all at once. Fortunately, the IRS understands that in many instances this is the case, so they offer the option of an installment agreement. Be mindful that this type of agreement does not get you out of paying the interest and penalties associated with not paying on time in full, but may be a very necessary option in certain cases.
An installment agreement is essentially a monthly payment plan with the IRS that allows you to pay off your remaining tax debt. There are several types of installment agreements that can be negotiated, so read on to see which one best fits your situation:
1. Guaranteed Installment Agreement: If you owe the IRS $10,000 or less and are current on your you previous five year’s worth of taxes, you have not received an installment agreement in the last 5 years, and you meet a few other basic criteria, then you are essentially guaranteed to be granted an installment agreement. The biggest benefit of this option is that the IRS will not file a federal tax lien against you (which would negatively impact your credit).
2. Streamlined Installment Agreement: If your balance is $25,000 or less, you can pay it off in 5 years or less and you meet other basic criteria, you likely qualify for a streamlined installment agreement. Again, in this case, a tax lien is also not filed.
3. Partial Payment Installment Agreement: If the payments for a guaranteed or streamlined installment agreement are too much for you to afford, you may want to consider requesting a partial payment installment agreement. You can have longer to pay off the debt and your payment is set based on what you can afford. The downside is that the IRS may file a tax lien to protect their interests.
4. Non-streamlined Installment Agreement: If you owe the IRS more than $25,000 and/or need more than 5 years to pay the debt, you will need to apply for a non-streamlined agreement. You will be asked to provide significant financial documentation for this type of agreement.
Support for Applying for a Payment Plan
The IRS requires a fee of $120 to be submitted with an application for an installment agreement (see the IRS website for details). The application process can be a bit complicated and you may want to request the help of a tax professional to be sure that the application is completed correctly with the best chance of approval. Success Tax Relief has helped thousands all over the country secure installment agreements with the IRS. Give Success a call today at (877) 958-6638 for more information.