If you cannot pay your entire tax liability all at once, an Installment Agreement is an alternative allowed by the IRS. The IRS has four different types of installment agreements: guaranteed, streamlined, partial payment, and non-streamlined.
The Internal Revenue Service is willing to accept some form of payment arrangement for past due taxes. The IRS has rules and regulations a taxpayer must abide by before qualifying for a payment plan.
- Taxpayer must be current and have filed all tax returns. It is okay to owe money but taxpayer must file.
- Taxpayer is required to disclose all assets they own including bank accounts and cash.
- Taxpayer cannot have sufficient cash available in bank accounts, brokerage accounts or money market accounts to pay the IRS.
- Taxpayer cannot have the ability to borrow the amount owed to the IRS from outside sources. Example of this is a second mortgage in a home.
If you are compliant with the requirements and rules above, we can proceed to arrange a repayment of taxes with the IRS. Our experts will negotiate on your behalf directly with the IRS wither over the phone with ACS (Automated Collection System), or in person with an Internal Revenue Officer.
The IRS dictates how and with whom negotiations will be handled based on the total dollar amount owed by the taxpayer.
When it comes to setting up an IRS payment plan, there are a few options to choose from. In general, the type of arrangement you can obtain depends on the amount of taxes that you owe and how quickly you are able to pay. Let’s take a look at the different kinds of tax payment plans that are available through the IRS.
1. Individual Installment Agreement
This payment plan applies to individuals who owe $50,000 or less in income tax, interest, and penalties (combined). With an installment agreement, you can make regular monthly payments over time. Payments can be made through Direct Debit (from your bank account), check or money order, credit card (online or by phone), EFTPS (Electronic Federal Tax Payment System), payroll deduction (from your employer), or an Online Payment Agreement (OPA). When you set up an installment agreement, make sure you will be able to make the monthly payments without defaulting.
To apply for an installment agreement, fill-out and mail IRS Form 9465 (Installment Agreement Request). You can also apply through the IRS.gov website with the Online Payment Agreement Application. If you received an IRS notice or tax bill, you can call the phone number provided on the IRS letter to request a payment plan, or call the IRS Individual Assistance line at 1-800-829-1040.
2. Installment Agreement for Individuals Who Owe Over $50,000
Individuals who fall into this category must submit Form 9465 as well as Form 433-F (Collection Information Statement). Form 433-F is used for obtaining your current financial information, in order to figure out how you can pay the overdue tax balance. On Form 433-F, you will be asked to list your accounts and lines of credit, plus real estate and any other assets you own. You’ll need to provide your employment information, including monthly income, as well as your monthly living expenses. Remember to attach your completed Form 433-F to Form 9465 and mail them together.
3. Small Business Installment Agreement
Businesses that owe $25,000 or less in back taxes may request an “In-Business Trust Fund Express” installment agreement (IBTF-Express IA). This type of payment plan usually doesn’t require a financial statement, although the business must currently have employees. An IBTF-Express IA provides a 24-month period to fully pay the outstanding tax liability. If the amount owed is greater than $10,000 (and below $25,000), the business must set up a Direct Debit installment agreement (DDIA). To apply for a small business payment plan, call the phone number on your IRS notice or tax bill, or call the IRS Business Assistance line at 1-800-829-4933. You can also apply through the IRS.gov website with the Online Payment Agreement Application.
Installment Agreement Fees
Note that it costs $120 to set up a standard agreement or payroll deduction agreement, and $52 to set up a Direct Debit agreement. If your income is below a certain level, the fee for setting up an installment agreement is $42. To request this reduced fee, submit Form 13844 (Application for Reduced User Fee for Installment Agreements). The charge for reinstating or restructuring an existing installment agreement is $50.