IRS Installment Agreements -
IRS.Gov Installment Agreement
A monthly payment plan is often the easiest way to pay off any large debt, even an IRS tax liability.
Do not equate having the"easiest" IRS installment agreement with having the best IRS installment agreement. A taxpayer may have tax relief options
Also, the IRS will charge interest and penalties for late tax payments regardless of your reason for late payments. To request an installment agreement with the IRS, you must submit IRS Form 9465. To add tax liabilities to an existing installment agreement you must contact the IRS directly.
Guaranteed Installment Agreements
The IRS will automatically agree to an installment plan if you owe $10,000 or less. You must also meet all of the following criteria:
A taxpayer has not filed late or paid late in the previous five years. This does not include extensions of time to file. It means missing a tax deadline without taking any action.
A taxpayer must not have any unfiled tax returns.
The taxpayer agrees to file on time and to pay on time in future tax years.
The taxpayer agrees to allow the IRS to take any refunds you may be given in the future.
The minimum monthly payment the IRS will accept is the total of your balance due, including penalties and interest, divided by 36 months. If you want to pay more than this to get rid of the debt in less than 36 months, you certainly can.
The main benefit of a guaranteed installment agreement is that the IRS will not file a federal tax lien or levy against you for outstanding taxes due. Tax liens, like mortgage liens, give the IRS the right to certain assets if you don't pay. A tax levy gives the IRS the right to seize certain assets such as wages and bank accounts. Both IRS tax liens and tax levies can be reported to the credit bureaus and may negatively impact your credit score.
Individual IRS Payment Plans
Should you not be eligible for a guaranteed installment agreement (IRS.gov installment agreement), you may qualify for an individual payment plan by going to IRS.gov/opa.
Taxpayers can qualify for this type of installment agreement when the balance owed to the IRS is $50,000 or less.
According to the IRS, individuals can make full payment, or the taxpayer can assume a short-term payment plan (paying in 120 days or less) or a long-term payment plan (installment agreement) (paying in more than 120 days):
You can apply online for the long-term payment plan if you owe $50,000 or less in combined tax, penalties and interest, and have filed all required returns.
You can apply for the short-term payment plan if you owe less than $100,000 in combined tax, penalties, and interest.
Installment Agreements (PPIAs)
A partial payment installment agreement (PPIA) with the IRS allows a taxpayer to make a monthly payment to the IRS that is based on what you can afford after accounting for your essential living expenses. To qualify, you must owe over $10,000, have no outstanding returns (unfiled tax returns), have limited assets, and no bankruptcies. To request a PPIA, you must file Form 433 with Form 9465.
You can calculate your payment based on your disposable income using IRS Form 433. There is a filing fee of $225 ($107 if you elect the direct debit option). A partial payment plan can be set up for a longer repayment term, and the IRS might file a federal tax lien to protect its interests. You may have to provide pay stubs and bank statements to support your application and substantiate any equity you have in owned assets. The IRS might also require you to sell those assets to pay your tax debt rather than enter into a PPIA.
The terms of an IRS installment agreement (IRS.gov installment agreement) will be reviewed every two years in case you can make additional payments.
It is best to seek the advice of a federally
authorized tax professional, such as an
experienced IRS Tax Attorney,
if you are unable to pay your tax debt.
Our professional IRS tax relief team will talk
to the IRS on your behalf and can help you
manage the process so that it is not so
overwhelming. An IRS Tax Lawyer can also
help you analyze your current financial
situation and tax issues to help you decide
which tax relief program will best suit your needs.
4 Reasons the IRS Rejects
What You Can Do
Missing or Incorrect Information on the Application
The most common reason that people find their Installment Agreement rejected is simply that they did not fill out the form correctly, or at all. To apply for an Installment Agreement, you have to fill out Form 433, which is the Collection Information Statement. You want to fill out every section to the best of your ability. Under no circumstances do you want to lie or misinform the IRS, as this could not only lead to a rejection of the deal, in some circumstances, it could get you into hot water with the IRS, especially if they feel you purposely lied to them.
It helps to work with a tax professional if you are unsure how to proceed or what to include. This ensures you fill out the form accurately the first time, saving you a lot of time and effort.
A Bad Deal
An Installment Agreement has to make sense economically to the IRS. It is a mutually beneficial arrangement: it helps you pay your debt in an affordable way, and the IRS receives its funds in a reasonable amount of time. If you request such a long-term that your debt will pass the statute of limitations, then the IRS might be less willing to approve the deal. The same goes if your monthly payments are so low that they barely make a dent in the payment. Generally, as long as your deal is reasonable, especially in cases of lower tax bills, then you most likely will have an approval.
You Have “Unnecessary” Expenses
An Installment Agreement’s purpose is to provide you with sufficient funds to pay your living expenses and pay off your tax debt. As part of the application, you have to detail your monthly expenses and income. The IRS is looking to ensure that you are spending as much as you can toward paying down your tax debt without putting you into a difficult financial situation. However, if the IRS feels that some of your itemized monthly expenses are unnecessary, then they might decide to deny your Installment Agreement. Examples of unnecessary expenses might include high car payments, high rent, private school tuition and more.
You Are Not In Compliance Or Have a History of Defaulting
One of the main criteria for an Installment Agreement is that you are in compliance with your other tax payments and that you do not miss filing or paying in the future. Therefore, if you enter a tax agreement for one tax year and then do not file or pay your taxes the next year, the IRS will reject or cancel your Installment Agreement. If you have a history of defaulting on Installment Agreements, then the IRS might also reject your application for a new one. If you are already in an Installment Agreement and struggle to pay your taxes in a future year, you might be able to renegotiate your agreement, although there is no guarantee that the IRS will approve it.
Offer in Compromise
An Offer in Compromise can also be a possibility after all other options have been exhausted. An IRS settlement agreement through the Offer in Compromise program involves negotiating with the IRS to pay a lump sum for less than you owe. You will typically need an experienced IRS Tax Attorney to help represent you for this scenario. An Offer in Compromise is the ultimate IRS settlement. An Offer in Compromise will only be considered if the taxpayer is unable to make any type of installment plan agreement.