Payment plans are available in almost all tax cases. We meet you in face-to-face in person meetings to help you negotiate the best result with an easy payment plan with the IRS. The government allows taxpayers to pay off tax debt through an installment agreement. Because interest and penalties will apply, however, the IRS encourages taxpayers to pay taxes immediately. Interest and penalties can equal 8% to 10% per year.
If paying the entire tax debt all at once is not possible, an installment agreement is an alternative allowed by the IRS. The IRS has four different types of installment agreements: guaranteed, streamlined, partial payment, and non-streamlined.
Guaranteed Installment Agreement
To qualify for a guaranteed installment agreement with the IRS, the taxpayer must meet the following conditions:
- Owe less than $10,000, (not including interest and penalties);
- In the previous five years the taxpayer has filed tax returns, paid taxes owed, and has not entered into an installment agreement;
- The taxpayer is unable to pay the tax liability when due;
- The tax liability will be paid off within three years; and
- The taxpayer must pay at least the minimum monthly payment (tax liability, interest, and penalties divided by 30)
Under this payment plan, the IRS will not file a federal tax lie
Streamlined Installment Agreement
In most cases, a taxpayer that qualifies for a guaranteed agreement will also qualify for the streamlined installment agreement. A streamlined installment agreement has the following requirements:
- The tax liability, interest, and penalties do not exceed $25,000;
- The balance can be paid off within 60 months; and
- The proposed payment is equal to or greater than the “minimum acceptable payment” (the minimum acceptable payment is the greater of $25 or the minimum payment amount reached by dividing the tax liability, interest, and penalties by 50)
The taxpayer must pay a fee of $105 to set up the installment agreement or $52 for a direct debit installment agreement. To restructure or reinstate a previous installment agreement, the IRS charges a $45 fee. Like a guaranteed installment agreement, the IRS does not file a federal tax lie
Partial Payment Installment Agreement
A partial payment agreement allows the IRS to enter into agreements with taxpayers for the partial payment of a tax liability. To qualify for this arrangement, the taxpayer must complete a financial statement using Form 433-F to report income and living expenses. The IRS will review and verify the information. If the taxpayer has assets that can be sold to pay some of the tax debt, the IRS will require the taxpayer to provide additional information.
If approved, the taxpayer will be required to participate in a financial review every two years. This review may result in the increase in installment payments or the termination of the agreement.
Non-Streamlined Installment Agreement
If a taxpayer owes $25,000 or more and can make monthly payments to the IRS, a non-streamlined agreement is an option. The IRS will not automatically approve this agreement; instead, the taxpayer must negotiate with the IRS. The taxpayer must file Form 433-F, Collection Information Statement. This form collects information about income, debts, living expenses, assets, accounts, and allows the taxpayer to propose an installment payment amount.
It will usually take a few months for the IRS to review a proposed payment plan. The IRS may refuse a proposed agreement if it considers some of the taxpayer’s living expenses unnecessary, if untruthful information was provided, or if the taxpayer failed to complete a prior installment arrangement.
If a taxpayer is unable to pay a tax liability through a non-streamlined agreement, consider filing an Offer in Compromise.
Ways to Make Payments
Taxpayers can make installment payments using the following methods:
- Payroll deduction
- Direct debit
- Check or money order
- Electronic Federal Tax Payment System (EFTPS)
- Credit card
- Online Payment Agreement (OPA)
When Will the IRS Revoke an Installment Agreement
The IRS can revoke an installment arrangement under the following circumstances:
- The taxpayer misses a payment;
- The taxpayer does not file a tax return or pay taxes after the agreement is entered into ;
- The taxpayer provided inaccurate information on Form 433-F; or
- The taxpayer is paying under a partial payment installment agreement and a review indicates a change in their financial position.
Consider Hiring a Professional
Consider hiring a tax attorney to negotiate on your behalf to get the best result. With a pro you don’t have to worry yourself about which forms to use or how to go about arranging a payment plan. TaxReliefNJ can reconcile any tax issues you may have with the IRS. We have over 20 years experiences working with the IRS. Contact us to schedule a free consultation today. Contact our tax law firm to discuss your tax matter today.
OFFICIAL IRS PAYMENT PLAN GUIDANCE
If you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.
Before applying for any payment agreement, you must file all required tax returns.
You may be eligible to apply for an online payment agreement
- Individuals must owe $50,000 or less in combined individual income tax, penalties and interest, and have filed all required returns.
- Businesses must owe $25,000 or less in payroll taxes and have filed all required returns.
- If you meet these requirements, you can apply for an online payment agreement.
Even if you’re ineligible for an online payment agreement, you can still pay in installments
- Complete and mail Form 9465, Installment Agreement Request(PDF) and Form 433-F, Collection Information Statement (PDF);
- Call 800-829-1040or the phone number on your bill or notice
Small Businesses with employees can apply for an in-Business Trust Fund Express installment agreement
- These installment agreements generally do not require a financial statement or financial verification as part of the application process.
- Find out if you qualify and how to apply.
Understand your agreement & avoid default
- Your future refunds will be applied to your tax debt until it is paid in full;
- Pay at least your minimum monthly payment when it’s due;
- Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
- File all required tax returns on time & pay all taxes in-full and on time (contact us to change your existing agreement if you cannot);
- Make all scheduled payments even if we apply your refund to your account balance; and
- Ensure your statement is sent to the correct address, contact us if you move or complete and mail Form 8822, Change of Address(PDF).
If you don’t receive your statement, send your payment to the address listed in your agreement.
There may be a reinstatement fee if your agreement goes into default. Penalties and interest continue to accrue until your balance is paid in full. If you are in danger of defaulting on your payment agreement for any reason, contact us immediately. We will generally not take enforced collection actions:
- When an installment agreement is being considered;
- While an agreement is in effect;
- For 30 days after a request is rejected, or
- During the period the IRS evaluates an appeal of a rejected or terminated agreement.
Changes to user fees, effective Jan. 1, 2017
|USER FEE CATEGORY||FEE AS OF JAN. 1, 2017|
|Regular installment agreement 1||$225|
|Regular installment agreement with direct debit (DDIA) 2||$107|
|Low income installment agreement (regular or DDIA)||$43|
|Online payment agreement — regular installment agreement 3||$149|
|Online payment agreement — Direct debit installment agreement (DDIA) 4||$31|
|Restructured/reinstated installment agreement||$89|
|Restructured/reinstated low income installment agreement (new fee)||$43|
User fee table notes:
- Apply by submitting Form 9465, Installment Agreement Request(PDF), by contacting a telephone assistor or at an IRS walk-in office. Choose to make payments by means other than direct debit.
- Apply by submitting Form 9465, Installment Agreement Request(PDF), by contacting a telephone assistor or at an IRS walk-in office. Choose to make payments by direct debit from a bank account.
- Apply online. Choose to make payments by means other than direct debit.
- Apply online. Choose to make payments by direct debit from a bank account. Lowest cost choice.