A monthly payment plan is frequently the most pleasant way to clear off any enormous tax debt, even a tax liability, and the Internal Revenue Service (IRS) presents different payment plans and installment agreements to help taxpayers get rid of their tax debts.
The taxpayer can apply for an installment agreement online at the IRS website or by submitting Form 9465, but you must approach the IRS directly to include tax liabilities to an existing installment agreement. Every installment agreement is subject to certain stated guidelines and to qualify for any of the installment plans, the taxpayer has to meet these guidelines.
The Internal Revenue Service (IRS) will generally charge interest for late tax payments even if you enter an agreement.
Guaranteed Installment Agreements;
The Internal Revenue Service (IRS) will automatically agree to an installment plan if you owe $10,000 or less. You must meet all of the following criteria:
You (and your partner if you’re married) haven’t filed a late return or paid late in the previous five years. This does not include extensions of time to file. It means missing a tax deadline without taking any action.
You must agree to file on time and to pay on time in future tax years.
You agree to pay the amount you owe within three years.
You don’t have an open bankruptcy proceeding.
You might have to give detailed information regarding your finances if you owe the IRS more than $10,000.
The main advantage of a guaranteed installment agreement is that the IRS will not file a federal tax lien or levy against you for outstanding taxes due. Tax liens, such as mortgage liens, give the IRS the right to certain assets if the taxpayer does not pay his or her debt. A tax levy provides the Internal Revenue Service (IRS) the right to seize certain assets. Both liens and levies can be reported to the credit bureaus and negatively impact your credit score.
Individual Payment Plans
Taxpayers can be eligible for this type of agreement when the balance owed to the IRS is $50,000 or less.
According to the IRS, individuals can make complete payment, they can embrace a short-term plan to pay off their debt in 120 days or less, or they can agree to a long-term installment agreement to pay off the tax debt in more than 120 days.
You can request online for the long-term payment plan if you owe $50,000 or less in combined tax, penalties and interest, and have filed all required returns.
You can bid for the short-term payment plan if you owe less than $100,000 in combined tax, penalties, and interest.
What If You Unable to Pay?
It is pertinent to contact the Internal Revenue Service (IRS) immediately if your request for an installment agreement is accepted and your financial situation turns out to be more appalling than you thought or if you encounter a financial upset. There are alternatives to help you resolve your tax problems. You might be able to reduce your monthly payment if you have agreed to pay more than the minimum each month.
However, you might have to provide detailed information or documentation on your financial status.
Partial Payment Installment Agreements (PPIAs)
A partial payment installment agreement (PPIA) allows the taxpayer to make a monthly payment to the IRS that is based on what you can afford after accounting for your essential living expenses. You must owe over $10,000 to qualify and have no outstanding returns, have limited assets, and no bankruptcies. To request a PPIA, you must complete Form 433, and Form 9465.
You can calculate your payment based on your disposable income using Form 433. A partial payment plan can be set up for a longer repayment term, and the IRS might file a federal tax lien to protect its interests. You might have to provide pay stubs and bank statements to support your application and substantiate any equity you have in owned assets. The terms of the agreement will be reviewed every 24 months in case you can make additional payments.
The IRS might require that you sell assets to pay your tax debt rather than enter into a Partial Payment Installment Agreement (PPIA).
An Offer in Compromise (OIC):
An Offer in Compromise (OIC) is a way for a taxpayer to resolve his or her debt for less than the amount that you owe, which is agreeable to the IRS if you meet certain stated requirements. The OIC is a legitimate option if a taxpayer cannot pay his or her full tax liability, or if by doing so or trying to do so creates a financial hardship. The decision will depend on the taxpayer’s unique circumstances such as Income, Expenses, how much equity you have in various assets, and how much of the debt the IRS thinks that the taxpayer will be able to pay.
An offer in compromise might be a possibility after all other options have been exhausted. An offer in compromise involves negotiating with the IRS to pay a lump sum for less than what you owe. You will typically need a tax professional to help represent you. An offer in compromise will only be discussed if you’re unable to make any type of installment plan agreement.
It is best to seek the advice of a federally authorized tax professional, such as an enrolled agent, if you’re unable to pay your tax debt. A professional can talk to the IRS on your behalf and can help you manage the process so it’s not so overwhelming. A professional like a Tax Attorney can also help you analyze your financial situation and tax issues to help you decide which program will best suit your needs.
ent Agreements