IRS Installment Agreement
IRS installment plan is a payment agreement between a taxpayer and the IRS. Under this agreement, the taxpayer usually has three to five years to pay the full debt. Taxpayers need to fill up complete Form 9465 along with their income tax return and select the amount they would like to pay each month to sign up for an installment plan. Easiest way to pay off any large debt is the monthly payment mode. You can indeed make arrangements with the IRS to pay off any taxes you owe by this way. There are four different types of installment agreements are offered by IRS. All of them are subjected to certain rules. It is your responsibility to find out which form you qualify for so you can tell the IRS what type of payment agreement you’d like to set up.
Types Of Installment Agreement
1- Guaranteed Installment Agreements
In this type of agreement if the balance you owe is $10,000 or less as of current year and if you meet all of the criteria mentioned below, IRS is required to agree to an installment plan. Have a look at the criteria-
- All your tax returns are filed.
- You’ve had no other installment agreements in the past five years.
- You haven’t filed late or paid late in the previous five years.
- You agree to file on time and pay on time for future tax years.
- You’ll pay off your balance in 36 months or less.
2- Streamlined Installment Agreements
A person can qualify for Streamlined installment agreement when the balance owed to the IRS is $50,000 or less as of the current year. The taxpayer must agree to pay off the balance in 72 months or less. With this, you must agree to file your tax returns on time and pay your taxes on time in the future. And the IRS requires you to first file all your tax returns if any are late. The main benefit of a streamlined installment agreement is that the IRS will not ask you to complete a financial statement. Furthermore, the IRS will not file a federal tax lien.
3- Partial Payment Installment Agreements
Partial payment installment agreement is a type of payment plan that is based on what actually you can afford after taking into consideration your essential living expenses. This type of plan can be set up to cover a longer repayment term and the IRS might file a federal tax lien to protect its interests in collecting the debt.The IRS reevaluates the terms of partial installment agreements every two years to see if you might be able to pay more. In this type of agreement the IRS will ask you to fill out a financial statement to report your average income and living expenses for the past three months. Also, you need to provide your bank statements as a proof in this.
4- “Non-Streamlined” Installment Agreements
This type of installment agreement is often referred when you owe is over $50,000 and you need a repayment term longer than five years, or if you don’t meet any of the criteria for the previous installment agreements. The IRS will likely file a federal tax lien if they haven’t already.The IRS will ask that you provide a financial statement so they can analyze how much you can afford to pay each month. The IRS may also ask you to sell assets, or get a home equity loan so you can pay your tax debt without entering into this system of installment agreement.
How To Apply For IRS Installment Agreement To Pay Tax
To apply for an IRS installment agreement, you need details according to IPS records, like your name, address, email address, date of birth, filing status and Social Security number. For business owners the process is little different as they need to provide an Employer Identification Number, address, assignment date of the EIN and caller ID from notice. You can decide how much you pay a month under your installment agreement. If you don’t pay the monthly payment amount or if you offer too low of a payment, the IRS will take the amount and divides the number by 72 to figure your monthly payment amount you owe on your taxes.