If you don't have enough money in your bank account to pay immediately, IRS installment plans or payment plans exist. It is fairly simple to apply for a payment plan with the IRS.
IRS Installment Plans
IRS Tax Payment or Installment Plan Options & How They Work
IRS Installment Plan
IRS Installment Agreement or IRS installment plan can help income taxpayers pay off their tax debt over a period of time in the form of an installment loan agreement.
Typically, IRS plans take five years or less to be paid in full.
The monthly payments have a fixed due date.
The payment amount is based on the amount owed and how much you can afford to pay each month.
The IRS may grant extensions to your IRS payment plan under certain conditions:
- if you can't pay the IRS installment agreement.
- you are filing your federal income tax return.
- you discovered that you are not able to make the payment amount.
What are your options if you have financial hardship?
IRS installment agreements are one of your options if you can’t pay your federal taxes in full when they’re due.
These agreements are payment plans, & allow you to pay your debt over a time you establish with the IRS.
If you set up an automatic withdrawal from your bank account with a form 9465 installment agreement request you will not forget the monthly payment.
There are Several Types of IRS Tax Payment Plans
- You have the right to an agreement without submitting a financial statement if:
- The amount of tax you owe (not counting interest and penalties) is less than $10,000.
- You (and your spouse, if you filed a joint tax return) have filed and paid all taxes due for the last five years.
- Neither you (nor your spouse, if you filed jointly) have had a payment agreement with the IRS in the previous five years.
- You can pay the full amount you owe within three years.
- You agree to pay the liability before the collection statute date expires.
- You comply with the tax laws during the agreement.
There are two types of Streamlined Agreements, depending on how much and what type of tax you owe.
Assessed tax liability under $25,000 (include all assessed tax, penalty, and interest in computing the balance due).
This is available to:
- Businesses that are still operating and only owe form 1120 income tax or form 1065 late filing penalties; and
- Businesses that have gone out of business that owes any type of tax.
Tax liability from $25,001 to $50,000 (include all assessed tax, penalty, and interest in computing the balance due).
This is available to:
- Individuals; and
- Out-of-business sole proprietors.
Note: To get this type of agreement, you must pay through either a direct debit or payroll deduction agreement.
- For both types, you must pay the debt in full within 72 months and within the time limit for the IRS to collect the tax.
- You are not required to submit a financial statement.
- These may be granted if the unpaid balance is less than $25,000.
- Taxpayers who owe more than $25,000 can be considered if they reduce the amount owed by making payments below $25,000.
- Accounts are routine installment agreements when the type of debt is not eligible for any other type of payment plan.
- If you don’t meet the criteria for guaranteed, streamlined, or in-business trust fund express installment agreements, you can still request an installment agreement from the IRS.
- You can request a routine installment agreement by mail, but not online.
Partial Payment Installment Agreement
- With a partial payment installment agreement, you must have some ability to pay your tax liabilities but make payment in full within the remaining time the IRS has to collect.
- The IRS may allow you to make payments until this collection period expires.
- If you’re in this situation, you may qualify for an Offer in Compromise to settle your taxes.
Before considering an IRS installment agreement review the notice and make sure you owe the amount the IRS claims.
If you do not think the tax liability is correct, you have the right:
- To pay only the amount of tax legally due, including interest and penalties
- To have the IRS apply for all tax payments properly.
If you’ve received an IRS notice, call us at 844-888-1040 to discuss the amount the IRS CLAIMS you owe. Don't ignore an IRS notice or a tax lien that can be filed.
Prepare for the IRS installment agreement
Before you request an installment agreement, you should:
1) File all required tax returns (even if you can’t pay)
- The IRS will only agree to an installment agreement if you are in full compliance. This means you have filed all your tax returns and made estimated tax payments or payroll tax deposits, if necessary.
- Once you’ve entered into an agreement, you must stay in full compliance or your installment plan may default.
2) Review your finances to calculate what you can afford to pay monthly.
Consider Other Ways to Pay
See if you are able to borrow from a bank or a member of your family to pay the balance
If you can, it will probably be cheaper because the IRS charges you interest even when you’re on a payment plan.
By paying the IRS off with a short-term payment plan, you can avoid some penalties and interest.
Documentation: The IRS may ask you for supporting documents for your income, expenses, and other amounts you owe (For example, Home and car loan payments, other obligations.)
The IRS publishes and uses national and local standards to determine allowable monthly expenses and arrive at the appropriate monthly payment.
If you feel you should be allowed more than the standard amount, provide reasoning with your application.
The Six-Year Rule: Generally, if you only owe individual income tax, you may qualify for the Six (6) Year Rule. You’d need to provide financial information but not proof of reasonable expenses.
You must stay current with all filing and payment requirements.
This includes projected penalties and interest on the tax debt.
The installment payment to the IRS NORMALLY must be paid:
- within six years (72 months)
- within the collection statute date
The One Year Rule: If you are unable to pay your debt in full within six years, you may be given up to one year to modify unnecessary expenses.
By eliminating needless expenses, you may be able to pay the liability within the six-year limit.
Fortunately, taxpayers are allowed to put in place an IRS installment plan for taxes owed.
We solve tax problems daily with solutions such as an IRS installment plan.
We can help set up a payment plan for tax debt owed that you can afford.
UNDERSTANDING IRS TAX PAYMENT PLANS
Frequently Asked Income Tax Relief Questions
What Is A Tax Lien?
A Tax Lien is a creditor's claim on the property of the debtor. It is effectively a public declaration by the IRS that it can impose liens against any income, assets, or real estate owned by the taxpayer in order to collect unpaid taxes.
What Is A Tax Lien On A Bank Account?
A tax lien is the government's way of enforcing their collection of an unpaid debt owed to them. A tax lien on a bank account means that the person who owes taxes has to pay the IRS before paying any other creditor their portion of what he or she earns.
What is Income Tax Relief?
In its simplest form, is the reduction of one's income taxes. What this actually means is that there are certain conditions that qualify an individual to reduce their tax burden at either the state or federal levels.
How To Claim Tax Relief?
There are a number of ways that you can file a tax return in order to claim tax relief. The most common method for claiming tax relief is by filing a personal income tax return with the IRS.
What Are Estimated Tax Payments?
Estimated tax payments are a way to pay your taxes on time, by making installments of the estimated amount of taxes owed for this year. Estimated tax payments mean that the taxpayer must pay income and employment taxes as they come due during the year on a timely basis without waiting until after all of the earnings have been received or until their return has been filed.
How Does A Power Of Attorney Sign A Tax Return?
A power of attorney is any person you authorize to take care of your affairs while you are unable to. When signing a tax return, the signer must be authorized by the taxpayer to act for them.
What Is The Taxpayer Bill Of Rights?
The Taxpayer Bill of Rights provides a list of ten practices that the IRS should implement to increase taxpayer satisfaction and decrease taxpayer burden.
What Is Child Tax Credit?
Child Tax Credit (CTC) is a federal tax credit that offsets the cost of raising a child and having another dependent. The amount of CTC depends on your filing status, how many children you have, and your Adjusted Gross Income (AGI).
Can You Make Payments On Taxes?
Yes, you can make payments on taxes. The IRS allows for two different ways to pay tax debt: either through an installment agreement or through Wage Garnishment. Generally, the IRS will allow you to enter into an Installment Agreement.
Can I Pay My Taxes Via Direct Debit?
Unfortunately not, but the IRS does offer a few different payment options. The best way to pay taxes is in a timely manner before they're due. It's possible to go directly to the IRS and pay them in person with a Debit or Credit Card at an IRS Taxpayer Assistance Center.
How To Check Tax Payment Online?
Tax filing and payments are processed by the IRS and/or States. All Americans should make an appointment with a tax professional like Keith to be sure they submit their taxes correctly. The IRS website offers comprehensive information on what you need to do during this process, including how long it takes, penalties for not filing your taxes.
What Is An IRS Installment Agreement?
An Installment Agreement is an arrangement granted by the IRS. It indicates that the taxpayer can pay his or her outstanding taxes in equal monthly installments over an extended period of time. Do note that interest is applied to the balance owed.