IRS Installment Agreements may let you pay off your tax debt gradually in monthly installments if you can’t pay it off in full.
The IRS may be a difficult and impersonal entity to work with, but it is also highly logical and practical. The agency understands that it simply cannot take money that doesn’t exist. Allowing taxpayers to pay down debt over time as a form of tax resolution, can often be the easiest and best way for the agency to collect all the money it is owed. Since the IRS collects interest on past due amounts, it does not burden the agency financially to allow someone to pay back taxes gradually in installments.
In many cases, IRS installment agreements are very viable options that are beneficial for both the taxpayer and the IRS. Indeed, you will usually have to pay penalties and interest, but knowing how to set up an IRS payment plan through successful tax negotiation can help you get back on track, allowing you to become debt free in the future.
What is an IRS Installment Agreement?
There are two types of IRS installment agreements: formal and informal. In an informal installment agreement, the taxpayer agrees to make monthly payments within two years that will pay off the balance. In a formal installment agreement, the taxpayer agrees to make monthly payments in a specified amount, and the IRS agrees to accept them. Under an informal installment agreement, a taxpayer can allocate payments, such as against the trust fund portion of employment taxes, but not under a formal installment agreement.
What is the Minimum Monthly Payment?
In the case of balances between $10,000 and $25,000, your minimum payment will be the balance due divided by 72. There is a consensus that IRS collectors are reasonable individuals. If an IRS collection employee sets a taxpayer’s installment payment at an amount that the taxpayer’s representative believes is too high, the representative can speak with the collection employee’s manager. If the representative is unable to resolve the amount of the employee’s installment payment with the collection employee’s manager, he can appeal to the IRS appeals office.
What Are The Benefits of an IRS Installment Agreement?
- Avoid Further Penalties
If you don’t communicate with the IRS, they can take further action against you, including wage garnishment. Setting up an installment agreement in good faith will keep you on good terms. - Improve Your Credit
If your credit score took a hit due to unpaid taxes, setting up and sticking with an installment will help improve your numbers and help get them back to where they were before your audit. - Ensure Future Tax Refunds
To make sure you receive federal tax refunds in the future, it’s important to make sure your balance with the IRS is up to date. An installment plan lets you schedule payments so you’re up to date by tax season.
How Long Does It Take For An IRS Installment Agreement?
Generally, it takes 15 to 30 minutes to set up the initial agreement by phone and then approximately four to six weeks to finalize the direct debit setup. You can expect the process to take a little longer if you can’t pay by direct debit or payroll deduction.
How Long is the IRS Installment Agreement?
IRS payment plans last six years and can be initiated when you file your taxes. Fill out form 9465, Installment Agreement Request and the IRS will then set up a payment plan for you.
How Can TaxRezPro Help You?
The IRS allows numerous ways for arranging to pay down tax debt. Our goal is to set up a payment option that:
- works for you
- pays off your tax debt quickly
- and keeps interest accumulation low.
There is a solution to every IRS problem! Let us help you stop worrying and start living!
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If you need an expert tax resolution provider who knows how to navigate the IRS maze, call us today at 1.888.4TAXREZ or use our contact form, and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.