You can’t pay your tax. And even you have interest penalties. The IRS payment plans provide options to ease this burden on taxpayers. However, IRS installment agreement isn’t for everyone. First, check if you’re eligible for an IRS tax installment plan, and then find the right IRS installment plan for your financial situation.
What happens if you don’t pay your tax on time?
The IRS will apply interest and a monthly late payment penalty for your unpaid taxes by the final payment date. Besides, there’s also a penalty for failure to file a tax return. Even if you can’t pay your balance in full, at least you should file timely.
What is the IRS Installment Plan?
An IRS installment plan is an agreement to pay tax debts over a certain period. Keep in mind that you have to close your debt in this period. Otherwise, you may face a tax lien, garnishments, or other actions. Besides, you still have to pay penalties and interest, but installment plans help make all payments more affordable. Moreover, an installment agreement may be viable if your assets or income don’t qualify for an Offer in Compromise or Currently no Collectible status.
Does an IRS Installment Plan Stop the Garnishment?
Let’s say you request a payment plan, and it’s pending to discuss your situation. In this period, the IRS can’t levy assets or income, and time to collect is suspended or prolonged. If you’re eligible, an installment agreement is one of the ways to stop garnishment.
After requesting, an installment agreement is pending review. If it’s rejected, the collection period is suspended for 30 days. Still, you have the right to appeal an IA rejection or termination. With this right, the collecting period is suspended while waiting for a decision on an appeal until the final decision.
How to Understand Whether You’re Eligible for An IRS Payment Agreement
The IRS may not even demand an explanation of your financial situation for smaller debts. However, depending on the debt, the IRS will ask you for detailed answers and documents. Ultimately, you must also meet some criteria to start your negotiation. For example, you shouldn’t be in bankruptcy proceedings. You should file all required tax returns. Or you shouldn’t have a previous installment.
The IRS offers long-term and short-term payment options.
Short-term payment plan: If you owe less than $100,000 in combined tax penalties and interest, you can pay your tax debt in 90 or 180 days.
Long-term payment plan: If you owe $50,000 or less in combined tax, penalties, and interest, you’ve filed all your tax returns, and you can pay your tax debt over 180 days.
Long-term payment plan: You have filed all required returns and owe $25,000 or less in combined tax, penalties, and interest.
- If you’re eligible for a short-term or long-term payment plan, you can apply for an IRS payment plan online via the Online Payment Agreement tool.
- If you’re not eligible or unable to apply a payment plan, you may still be able to pay in installments. Individuals should fill out Form 9465 or call the IRS. For more details, check the official website.
Remember: Providing an IRS payment plan agreement doesn’t weasel out you of interest and penalties. Still, you must pay them until your balance is closed. The main goal of a payment plan is collecting tax debt in periodically.
Better, you can talk to our tax attorneys right now to see if you’re eligible for IRS installment payment and to create the best payment plan for your financial situation.
What is the Minimum Monthly Payment for an IRS Installment Plan?
If you want to apply for long-term payment, the monthly minimum payment plan will vary according to the amount of debt.
The IRS will ask how much you can pay per month. In general, you can choose how much you pay every month. If you leave that decision up to the IRS, the minimum debt you have to pay is the total debt amount divided by 72.
Fees for IRS Installment Plans:
The cost of an IRS payment plan varies based on application method and eligibility for a fee reduction. Please check out from here to see all the fees. You don’t have to pay anything for a short-term payment plan to set up an installment plan. Besides, fees may be lower for lower-income taxpayers.
Short-term payment plan setup fee
- Apply online, by phone, mail, or in person. The fee is $0.
Long-term payment plan setup fee
If you pay through direct debit:
- Apply online. The fee is $31.
- Apply by phone, mail, or in person. The fee is $107.
If you pay through direct pay, EFTPS, or else:
- Apply online. The fee is $130
- Apply by phone, mail or in person. The fee is $225.
- For low-income taxpayers’ fee is $43.
Types of IRS Installment Agreements
If your tax debt is less than $10,000 (not including penalties and interest), guaranteed installment agreements can suit you. Your installment plan will most probably be automatically approved if you meet the criteria. You must commit to paying off your debt within three years. Your total balance is divided by 36 months to subtract the minimum monthly payment. Besides, the IRS won’t put a lien if you have a guaranteed installment agreement.
If your tax debt is less than $100,000 (including penalties and interest), streamlined installment agreements can be suitable for you. You have 72 months (6 years) to pay your tax debt. However, it can also offer 84-month terms. The minimum monthly amount you will pay is also found by dividing your total debt by 72. Besides, the IRS won’t put a lien if you have a streamlined installment agreement. For debts over $50,000, however, you must arrange direct debit payments or a payroll deduction to avoid a lien.
If you owe more than $100,000 or $50,000 (but choose not to pay by direct debit or payroll deduction), non-streamlined installment agreements can be suitable for you. However, this agreement can’t be automatically approved. Plus, the IRS may put a lien to protect their claim.
If you can’t pay your debt within the periods specified in other agreements, partial payment installment agreements can be suitable for you. You must negotiate this agreement with the IRS. Under this agreement, the IRS may put a lien and re-evaluate your case every two years.
How Much Is Interest on IRS Payment Plans?
When you have a payable balance, the IRS charges interest on your account. Even if you set up a payment plan with the IRS, this interest will continue until your balance is closed. Besides, the IRS adjusts the rate quarterly based on the federal funds rate in the first month of the previous quarter. If you feel a bit confused, it’s totally normal.
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