Installment Agreements with IRS: All You Need to Know
If you owe taxes to the Internal Revenue Service (IRS) and can`t pay them off immediately, an installment agreement could be a viable option. An installment agreement is a payment plan that allows taxpayers to pay their tax debt over time, rather than in one lump sum. In this article, we`ll discuss everything you need to know about installment agreements with the IRS.
What is an Installment Agreement?
An installment agreement is a payment plan that allows taxpayers to pay their outstanding tax debt in regular, manageable payments. This allows taxpayers to pay their debt over a longer period, which may be more affordable than paying the full amount at once. The IRS offers different types of installment agreements, including:
1. Short-Term Installment Agreement: This is an agreement that allows taxpayers to pay off their tax debt within 120 days. This type of agreement does not require a setup fee, but interest and penalties still accrue until the debt is paid in full.
2. Guaranteed Installment Agreement: This is an agreement that allows taxpayers to pay off their tax debt in monthly payments over a period of up to three years. Taxpayers who owe $10,000 or less may apply for this type of agreement without submitting financial information.
3. Streamlined Installment Agreement: This is an agreement that allows taxpayers to pay off their tax debt in monthly payments over a period of up to six years. Taxpayers who owe $50,000 or less may apply for this type of agreement without submitting financial information.
4. Partial Payment Installment Agreement: This is an agreement that allows taxpayers to pay off a portion of their tax debt in monthly payments over a longer period of time, typically up to ten years. Taxpayers who owe more than $10,000 may apply for this type of agreement if they are unable to pay their debt in full.
How to Apply for an Installment Agreement
To apply for an installment agreement, taxpayers must first file all required tax returns. Additionally, taxpayers must complete Form 9465, Installment Agreement Request, and submit it to the IRS. Taxpayers who owe more than $50,000 may also need to submit financial information, such as a Collection Information Statement (Form 433-A or Form 433-F).
Once the IRS receives the installment agreement request, they will review the request and send a response within 30 days. If the request is approved, taxpayers will receive an agreement that specifies the terms of the plan. If the request is denied, taxpayers may appeal the decision.
Benefits of an Installment Agreement
The main benefit of an installment agreement is that it allows taxpayers to pay their tax debt over time, rather than in one lump sum. This can make it easier to manage the debt and avoid potential collection actions, such as wage garnishment or levies. Additionally, if taxpayers make all payments on time and in full, they may avoid additional penalties and interest charges.
Conclusion
If you owe taxes to the IRS and can`t pay them off immediately, an installment agreement may be a viable option. There are different types of installment agreements available, depending on the amount of debt and the taxpayer`s financial situation. To apply for an installment agreement, taxpayers must file all required tax returns and submit Form 9465 to the IRS. If approved, taxpayers will receive an agreement that specifies the terms of the plan.