If you owe the IRS taxes or you foresee you will, and you cannot pay in full, you may want to request an IRS payment plan or Installment Agreement from the IRS. Get a better understanding below of what payment plan is best for you based on your debt amount as well as how to request it.
One of the ways that you can pay IRS taxes you owe is through a payment plan. This is a great option if you cannot pay all of your taxes as once because you can pay the IRS back over a series of manageable, monthly payments. You should know that there are many tax payment plans with each being most appropriate for your debt amount. Realize, with an IRS payment plan, you do end up paying more than your total balance because of interest and the failure to pay penalty. That being said, the benefit is that you can get back into compliance with the IRS and cut the failure to pay penalty by 50 percent!
The first type of IRS payment plan is known as a Guaranteed Installment Agreement. This type of plan is "guaranteed" to you under the tax code as long as you owe less than $10k (excluding penalties and interest). In most cases, you can file for a guaranteed installment agreement on your own. To do so, follow these steps:
1. File your taxes, including returns that you may have missed in the past.
2. Use Form 9465 or the Online Payment Agreement offered by the IRS. Make sure you estimate a reasonable monthly payment because you are only granted 36 months to pay back your balance. To estimate the minimum monthly payment, take your total tax debt and divide it by 30 (for 30 months).
3. For your first payment make sure you include the $105 for non direct debit or $52 for direct debit from a checking account.
4. Mail your form and tax return to the IRS.
5. Within 45 days you should receive an acceptance letter from the IRS.
The other type of IRS payment plan is a streamlined installment agreement. It is given this name because it does not require financial verification. With this type of payment plan you are given up to 60 months to pay back $25k or less in taxes owed. Follow the steps for the Guaranteed Installment Agreement except to figure out your minimum monthly payment divide your total tax debt by 50 months.
If you owe more than $25k you are going to look to apply for a Verified Financial Installment Agreement (VFIA). With this, the IRS will verify your financial situation before allowing you to move forward. With a VFIA it is best to hire a tax professional because you will need to complete a Collection Information Statement (Form 433-F or 433-A).
With many options, it is important to know what you are doing when selecting an IRS payment plan.
The Two Most Common IRS Settlements Defined
The offer in compromise program and the partial payment installment agreements are two of the most sought after tax settlement programs. These programs allow the taxpayer to settle their taxes for less than the total amount owed. Understand how each of these works.
What Happens When the IRS Issues an Intent to Levy?
If the IRS issues an intent to levy you need to know what is going to happen next, as well as how you can better your situation. This notice is telling you that the IRS intends to levy payments due to you, including salary, SSA benefits, OPM retirement benefits, or reimbursements.
Five Ways to Achieve IRS Tax Debt Relief
There are many ways to get tax debt relief. The method you choose depends upon your financial situation.
