A payment plan may be your best solution to resolving your tax problems.
Whether you call it an installment agreement, payment agreement, payment option or a payment plan, the idea is the same — you make payments on the tax you owe. That sounds like a good deal, but if you are able, you can save money by paying the full amount you owe as quickly as possible to minimize the interest and penalties you’ll be charged.
For those who cannot resolve their tax debt immediately however, an installment agreement can be a reasonable payment option. Installment agreements, generally (with the exception of a partial pay installment agreement) allow for the full payment of the tax debt in smaller more manageable amounts.
Frequently Asked Questions about Installment Agreements/Payment Plans
How to Set Up an Installment Agreement
Taxpayers wishing to pay off a tax debt through an installment agreement, and owe:
* $25,000 or less, you have a streamline option available to you. Without filing any financial statements (unless the minimum qualified payment cannot be met), the IRS, will set up a payment plan that combines tax, penalties, and interest. Once a Power of Attorney has been filed, we can help you set up an installment agreement that is optimal for your situation.
* More than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433A, will need to be completed.
Once a request has been filed, you will receive a written notification telling you whether your terms for an installment agreement have been accepted or if they need to be modified.
Are there fees to set up an installment agreement?
The IRS charges a user fee to set up your installment agreement. The user fee for new installment agreements entered into after January 1, 2007 is $105 and $52 for agreements where payments are deducted directly from your bank account. There is also a user fee of $45 effective January 1, 2007 regardless of income level for reinstating defaulted agreements or restructuring existing agreements. If you already have an approved installment agreement from a previous tax debt and your financial situation has changed, you may be able to modify or restructure your installment agreement to include additional amounts owed into one agreement.
What happens if I miss a payment?
Throughout the term of an installment agreement, your payments must be made on time. If your payments cannot be made due to a change in your financial condition, you should contact the IRS immediately. Failure to make timely payments could default your agreement. A default of your installment agreement may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action. Either can have a negative effect on your credit standing and cause financial difficulties.
What about enforced collection actions?
Generally, IRS enforced collection actions (i.e., levy against personal or real property) are not made while an installment agreement request is being considered, or: * While an agreement is in effect, * For 30 days after a request for an agreement has been rejected, and * For any period while a timely appeal is being evaluated by the IRS.