Expert Tax Representation is Essential
If a taxpayer isn’t able to pay their federal tax assessment all at once, they may be able to enter into an IRS installment agreement with the IRS. An installment agreement is an agreement made to pay taxes over a certain period of time. The IRS will also assess interest and penalties related to the debt, though some of the interest and penalties may be waived in some circumstances.
How Can You Qualify For An IRS Installment Agreement?
In order to qualify for an IRS installment agreement, you will first need to be completely current on your returns. This means that you will have to have filed all of your prior year returns even if you haven’t been able to pay them. If you haven’t filed your returns, you should file them now.
How Does An IRS Installment Agreement Work?
How an agreement needs to be paid is usually based on the amount of debt that is owed.
- If the balance is over $50,000, the IRS will review the taxpayer’s current financial situation and determine the amount that they can pay. From there, they will determine the amount of time the taxpayer will have to pay off the debt.
- If the balance is between $25,000 and $50,000, the IRS will request information about the taxpayer’s income and expenses. They will generally create a payment plan that will last 72 months.
- If the balance is between $0 and $25,000, the IRS will offer a payment plan of 72 months, but will not usually require any detailed financial information.
How Much Does An Installment Agreement Cost?
An IRS installment agreement has some related fees. In addition to the interest and penalties that have already accrued, the debt will continue to accrue interest costs while it is due. Although the amount of interest charged will go down as the principle of the debt is paid.
The IRS will charge a fee for a payment plan and there are additional options for lower income taxpayers.
How Long Will An IRS Installment Agreement Last?
An IRS installment agreement can be negotiated to last any time period, from a few months to as long as six years. When a payment plan is initially proposed, a taxpayer should go over their finances to determine how quickly they should be able to pay back their debt. Ideally, paying back the debt as soon as possible is preferred. If the debt cannot be paid back within six years — or if the monthly payments would be too high — the taxpayer can consult with their tax professional to explore other options to settle their debt.
How Is An IRS Installment Plan Paid?
Once the IRS installment plan is accepted, it will be automatically deducted from a bank account under a direct debit installment agreement — this ensures that the IRS will be paid on time. If a direct debit installment agreement is not required, the taxpayer can mail in a check each month or make an online payment via the IRS website
Could The IRS Refuse An Installment Plan?
The IRS accepts many payment plans, but it can reject it for a few reasons. The IRS may believe that you are fully capable of paying your tax debt; if you have a significant amount of income compared to your expenses, the IRS may ask that you pay your debts immediately. The IRS may also refuse a payment plan if it is believed that the documents you sent in are not entirely truthful; you may be considered to be hiding assets or cash. Installment agreements can also be refused if you have defaulted previously on another IRS installment agreement.
Could An IRS Installment Agreement Be Revoked?
Once an IRS installment agreement has been made, the taxpayer has to ensure that their payments go through on time until the entire debt has been paid off. An installment agreement may be revoked for the following reasons:
- The data that you initially provided to the IRS may have been missing or incomplete. This is why it’s absolutely critical that a taxpayer make sure that they disclose all of their assets and income and that they are correct about the amount of debt they owe.
- Your financial situation has changed. If you start making dramatically more money, the IRS may recall your debts. The IRS may request a review of your financial situation every 12 to 24 months.
- Subsequent tax returns are not filed or paid. To stay on an IRS installment agreement, an individual has to keep paying their new debt as well as their old debt and file future tax returns on time.
- A payment is missed. If payments are missed, the payment plan is generally revoked. However, you may have up to one or two months to initiate payments again.
Negotiating an IRS installment agreement can be complex. Those who owe a lot in taxes may want to consult with a tax resolution professional first, such as Tax Samaritan.
Tax Samaritan provides taxpayers the critical tax representation needed in dealing with the IRS and state tax agencies. Not only do we provide an immediate buffer in communication, we have the needed knowledge and skills to properly fix and resolve many problems that go sideways due to unawareness of tax code nuances. Tax Samaritan can help support taxpayers in getting into a payment plan. Again, a taxpayer can go it alone with the IRS, but there’s no reason to take on that kind of risk unnecessarily. It can be handled with the expert help and professionalism with Tax Samaritan at your side.
At Samaritan Tax Relief, we put our clients first, providing them with superior service for a reasonable fee.
If you are ready to hire a qualified tax representative, contact Samaritan Tax Relief today to get help in requesting an IRS installment agreement!
Samaritan Tax Relief is a team of Enrolled Agents with over 25 years of experience focusing on US tax resolution services. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional to resolve their tax problem.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Samaritan Tax Relief that is an Enrolled Agent (America’s Tax Experts).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.