What You Need to Know About IRS Payment Plans
Let’s talk hypothetically: tax season is almost over. You have a massive tax debt you need to take care of, but you only have a week to file. You also don’t have the money on hand to safely pay your entire tax bill. What options do you have available?
To be clear, not paying your taxes is something that many people choose to do in this situation, but it certainly comes with downfalls. For one, unpaid back taxes will result in penalties and interest, that can sometimes grow to be larger than the tax itself. The IRS can also garnish your wages and put liens on your property if you fail to pay your taxes.
But what if there was a way to help lessen the penalties and interest rates you have to pay? This would help to avoid or reduce certain penalties and the looming fear of massive debt. You may have heard of IRS payment plans, but at the same time you may be intimidated by them. Landmark Tax Group is here to help keep you informed and put your mind at ease when it comes to this popular debt relief option.
How to Get On an Installment Agreement
IRS payment plans, also called installment agreements, can be applied for in different ways. Some taxpayers choose to file their taxes and request a payment plan from the outset. Others who haven’t paid their income taxes for some time will choose to file a Form 9465 Installment Agreement Request by mail or online.
Once the request is filed, the IRS will take time to review your request and your tax account to see if you meet their criteria and guidelines for an approved payment plan.
If you owe $10,000 or less to the IRS, you are almost guaranteed an installment agreement acceptance. The following criteria must be met for a “Guaranteed Installment Agreement”:
- Owe income tax only of $10,000 or less (excluding penalties and interest);
- Have not failed to file any income tax returns or to pay any tax shown on such returns during any of the preceding five taxable years;
- Agree to fully pay the tax liability within 3 years;
- Agree to file and pay all tax returns during the term of the agreement; and
- Have not entered into an installment agreement during any of the preceding five taxable years.
Many taxpayers, however, have tax debt that is over $10,000. In this case, the IRS can more closely scrutinize your ability to pay the back taxes and may ultimately decide to reject your installment agreement request if the agency believes you have the ability to full pay.
In the case of larger tax liabilities, the IRS may required a taxpayer or prepare and submit a financial package so they can assess your income, expenses and assets. The financial review will allow the IRS to thoroughly investigate your finances in order to verify your claim of not being able to pay the amount in question. If they determine your income and assets aren’t enough to pay the debt, they will likely qualify you for an installment agreement.
Other Installment Agreement Facts
Just like most other debts, the IRS does charge interest taxes even while on an installment agreement. It’s also important to remember that a payment plan helps to ensure that the IRS doesn’t come down harshly on you while you’re making monthly payments, but it does not mean that the agency is forgiving the debt in any way. The IRS charges an installment agreement setup fee upon your initial payment along with ongoing penalties of various types, in addition to interest.
If you worry about being in debt for the rest of your life, don’t panic. The IRS can only collect the debt for up to 10 years from the creation of the debt. This means that you will generally have up until 10 years past the filing date to pay off the debt, so it won’t be looming over your head forever.
If you’re financially unable to pay your tax debt immediately, you may qualify to make monthly payments through an installment agreement. If you aren’t sure if a payment plan is right for your debt scenario, contact Landmark Tax Group for a free consultation.
Landmark Tax Group is a professional tax resolution firm that specializes exclusively in IRS and State back tax issues. Not only are we licensed Tax Relief Specialists, we are also former Senior IRS Agents who now serve the best interests of taxpayers like you – all we do is handle IRS and State Tax Relief matters, all day, every day.