If you owe money to the IRS but can`t pay it all off at once, an installment payment agreement can be a good solution to your problem. Here, we`ll explain everything you need to know about these agreements and how to set them up.
Installment payment agreements are plans that allow taxpayers to pay their tax debt in monthly installments rather than in a lump sum. These agreements are available to individuals, businesses, and self-employed individuals who owe $50,000 or less in combined tax, penalties, and interest.
There are several types of installment payment agreements available, and the one you choose will depend on your individual circumstances. Here are some of the most common options:
– Guaranteed Installment Agreement: For taxpayers who owe $10,000 or less and can pay off their debt within three years, the guaranteed installment agreement is a good option. With this plan, the IRS won`t file a federal tax lien against you.
– Streamlined Installment Agreement: With a streamlined installment agreement, taxpayers who owe $50,000 or less can pay off their debt within six years. This plan requires less financial information than other options and can be set up quickly.
– Partial Payment Installment Agreement: This type of agreement allows taxpayers to pay back a portion of their debt over time. It is available to those who owe more than $10,000 and can`t pay off their debt within the time frame of the other agreements.
– Non-streamlined Installment Agreement: For taxpayers who owe more than $50,000, a non-streamlined installment agreement is a viable option. With this plan, you`ll need to provide detailed financial information, and the IRS may file a federal tax lien against you.
To set up an installment payment agreement, you`ll need to apply through the IRS website or by mail using Form 9465. Before you apply, you`ll need to know how much you owe and how much you can afford to pay each month. The IRS will review your application and determine whether you qualify for an agreement.
Once your agreement is set up, you`ll need to make the payments on time each month. If you miss a payment, you may be charged penalties and interest. It`s also important to note that the IRS can cancel your agreement if you fail to make payments or fail to file your tax returns on time.
In summary, an installment payment agreement can be a great solution for taxpayers who can`t pay off their tax debt all at once. With several options available, it`s important to choose the plan that`s right for you and to make your payments on time each month. By doing so, you can avoid additional penalties and interest and get back on track with your tax obligations.