Understanding the IRS Installment Plan
An IRS Installment Plan is an agreement you make with the IRS to repay your taxes over a set period of time. This payment plan typically allows the taxpayer to make monthly payments that suit their financial situation. Although this might appear as a convenient solution, there are aspects of the IRS Installment Plan that need to be explored and understood thoroughly before one proceeds with it. As representatives of Brightside Tax Relief, our aim here is to guide you comprehensively through the IRS Installment Plan options.
Types of IRS Installment Plans
There are primarily four types of IRS Installment Plans. Note that each type has specific preconditions and structures:
- Guaranteed Installment Agreements
- Streamlined Installment Agreements
- Partial Payment Installment Agreements
- Non-streamline Installment Agreements
Guaranteed Installment Agreements
This Installment Plan applies to individuals who owe less than $10,000, excluding penalties and interest. This option does not necessitate a complete financial disclosure. However, there are certain criteria one needs to meet:
– The taxpayer must not owe any other installment agreement.
– The tax owed cannot be cleared with an Offer in Compromise.
– The taxpayer must be able to pay off the debt in three years or less.
– The taxpayer must have filed all tax returns in the past five years.
Streamlined Installment Agreements
Just as the name suggests, these agreements are simple and require minimal paperwork. Streamlined Installment Agreements are available for taxpayers owing under $50,000, including penalties and interest. Importantly, taxpayers have 72 months to pay the full balance under this agreement.
Partial Payment Installment Agreements
This agreement option is for taxpayers who cannot make the payments set under the Guaranteed or Streamlined agreements. Here, the size of the installment is based on what the taxpayer can afford after accounting for their living expenses. It is essential to note that the IRS has the right to review the terms of this agreement every two years.
Non-streamlined Installment Agreements
This program suits taxpayers who owe more than $50,000. This option requires a more comprehensive disclosure of one’s financial situation. Also, the IRS has the authority to include or exclude costs to figure out a monthly payment you can afford.
Fees involved with Installment Plans
The IRS does charge a fee to set up an installment agreement. As of now, the fee can range from $31 to $225, depending on how you apply (online or by mail) and your income level.
The Implications of Interest and Penalties
While an installment plan might sound like a reprieve, there is still interest and penalties that continue accruing on the unpaid balance. This can increase the total amount you end up paying.
Eligibility for IRS Installment Plans
If you owe $25,000 or less, you are generally eligible for an installment plan unless you demonstrated past unresponsiveness to collection efforts.
Process of Applying for an IRS Installment Plan
The IRS provides both online and offline options for applying for an installment agreement:
– For debt less than $50,000, you can apply online via the Online Payment Agreement tool on the IRS website.
– For larger debts, a Form 9465 and a Collection Information Statement (either Form 433-A or Form 433-F) should be mailed to the IRS.
Maintaining an IRS Installment Plan
Once an installment agreement is in place, it’s crucial to stick to the plan. Ensure that your monthly payments are made on time. Failure to do so could lead to the cancellation of the agreement.
Seeking Professional Help
While taxpayers can arrange an Installment Plan by themselves, seeking help from a tax professional can provide guidance on taxes owed, agreement options, and more.
In conclusion, understanding all aspects of IRS Installment Agreements is crucial before proceeding. Brightside Tax Relief can provide essential guidance to help you navigate these IRS repayment options. If you are finding it hard to deal with your tax liabilities, reach out to us today.
We recommend visiting the official IRS website for complete details on IRS Installment Plans. You can access this information here.
Remember, tax issues can become complex quickly. Obtaining the right information and seeking professional assistance can make a significant difference to your financial future.