IRS Installment Agreement Guidelines: What You Need to Know
If you owe money to the IRS, paying the full amount at once might not be possible. Fortunately, the IRS offers installment agreements, which allow taxpayers to pay their tax debt in smaller, more manageable payments over time. But before you apply for an installment agreement, it`s important to know the guidelines that come with it.
Here are some important things to keep in mind when considering an IRS installment agreement:
To be eligible for an installment agreement, you must meet the following criteria:
– Owed less than $50,000 in combined tax, penalties, and interest for the current year or previous years.
– Will be able to pay off the amount owed within 72 months.
– Filed all required tax returns.
2. Applying for an Installment Agreement
To apply for an installment agreement, you can:
– Apply online using the Online Payment Agreement (OPA) tool on the IRS website.
– Fill out and mail Form 9465, Installment Agreement Request, to the IRS.
– Call the IRS at 1-800-829-1040.
3. Payment Amount and Frequency
When you apply for an installment agreement, you will need to propose a monthly payment amount and a payment date. The IRS will review your proposal and either accept it or propose a different payment plan.
Your payment amount must be the maximum you can pay each month while still covering your necessary living expenses. The IRS will also calculate a minimum payment amount based on your current financial situation.
You can choose to make payments monthly, semi-monthly, or bi-weekly. You will need to make your payments on time to avoid defaulting on your agreement.
4. Penalties and Interest
Even with an installment agreement, you will still need to pay penalties and interest on your unpaid tax balance. The IRS will apply penalties and interest until your balance is paid off in full.
5. Defaulting on an Installment Agreement
If you miss a payment or fail to pay the full amount due each month, you will default on your installment agreement. Defaulting can result in additional penalties and interest charges, as well as legal action taken by the IRS to collect the debt.
If you are unable to make your payments, you should contact the IRS immediately to discuss your options.
In conclusion, an IRS installment agreement can be a helpful solution if you are unable to pay your tax debt in full. However, it`s important to understand the guidelines and requirements before applying. If you have any questions or concerns, consider consulting with a tax professional for guidance.