Installment Agreement
Setting up an installment agreement with the IRS may be a good way to help you pay off your debt with the IRS if you cannot pay the full amount all at once. An installment agreement allows your tax debt to be paid off over time by breaking it down into a series of affordable monthly payments to fit within your budget.
How an IRS Installment Agreement Works
The amount of each monthly payment is determined by considering the overall tax bill and your ability to pay. These payments must be made on time and failure to do so can default the agreement. IRS Form 9465 is used to request this special monthly installment plan and the IRS charges a fee to set up the installment agreement. As with other payment options, you'll first need to file any outstanding back tax returns before applying for this option with the IRS.
When the IRS grants you an installment agreement, you'll still be charged penalties and interest as you pay off your debt. And any refund owed in a future year will automatically be applied to the outstanding debt.
Installment Agreement Payment Plans
Certain plans only require a small monthly payment until the statue of limitations is reached and then the rest of debt is cleared. Other kinds of plans may demand a full repayment and require a larger monthly payment but, even in these cases, the increments are designed to be reasonable so the goal of paying off the debt can be achieved. The designated amount of the monthly payment will be determined by weighing the overall tax bill against what the taxpayer has the ability to pay. These installments must be consistently paid on time to avoid defaulting on the agreement.
What Type of Installment Agreement is Right for You?
The IRS offers different types of installment agreements and some have specific requirements you must meet in order to successfully set up the payment plan. An installment agreement is often fairly easy to obtain when the .amount of taxes you owe doesn't exceed $25,000 and you have a qualified tax professional like ENG Accounting & Taxation Srvc Inc. helping you file the necessary documentation. Even if you owe a larger amount, our Tax Department will work with the IRS to find the best solution to settle your tax debt.
The IRS rules vary depending upon how much you owe. If your tax debt is less than fifty thousand dollars, the IRS does not require you to submit a financial analysis of what you can afford to pay. For tax debts over fifty thousand dollars, the IRS requires that you submit Form 433-A which is a very detailed analysis using IRS standards as to what it thinks you can afford to pay each month.
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This is a very complex form to complete and when the IRS computes what it thinks you can afford to pay, it will show the highest monthly installment amount. A tax resolution specialist understands the ins and outs of the IRS and it's Internal Revenue Manual which can be of immense value to you. This specialist will act as your advocate to insure that the computation of what you can afford to pay reflects the lowest amount allowed by law, which is usually significantly less than the amount computed by the IRS.
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Contact ENG Accounting & Taxation Srvc Inc. today to discuss all the options available to pay off your tax debt with the IRS. We're focused on helping our clients in the most appropriate way and can help negotiate an installment agreement and will work with the IRS on your behalf to make sure you get the best deal possible for your individual situation.
