IRS Installment Plans
An installment plan allows you to pay your tax debt over time, rather than in one lump sum.
What is an IRS Installment Plan?
An IRS installment plan, also known as an installment agreement, is a payment arrangement that allows taxpayers to pay off their tax debt in smaller, manageable monthly installments over time, rather than paying the full amount they owe all at once. The payment amount will depend up on the amount of tax owed and the amount of time that the IRS has left to collect on the tax debt. In some circumstances, the IRS may even accept an installment plan for less than what is owed. Those types of installment plans are called Partial Pay Installment Agreements.
Installment Plans (What you NEED to Know!)
An installment plan is like making a deal with the IRS to pay them over time, rather than all at once. Interest and penalties will still accrue while payments are being made.
Benefits of an Installment Plan
- Pay Over Time: Make small, monthly payments to the IRS
- Fresh Start Pathway: A payment plan puts you on the pathway to having a fresh start with the IRS.
- No More Stress: Relieve your worries about the IRS and get some sleep at night.
Who can apply for an IRS Installment plan?
To apply for an IRS installment plan, you must meet the following criteria:
- You must be in tax compliance. This means you must have all back tax returns filed.
- Have the ability to make the payments.
- You must agree to remain in tax compliance for the period of the installment plan.
Tips to Make Your IRS Installment Plan Successful
Here are some tips to help you succeed with your installment plan:
- Be Tax Compliant before applying. If you need back taxes filed, we can help!
- Make the correct monthly payment offer. Your payment amount must be at least the amount of money owed divided by the time the IRS has left to collect the taxes.
- Stay Tax Compliant. Don’t file your taxes late.
- Ask for Help.Get a tax expert if you need help.
What payment plans does the IRS offer?
Can you pay the IRS in installments?
The IRS offers both full pay and partial-pay installment plans. Full Pay Installment Agreements are much more common, and require the taxpayer to full pay their entire tax debt (plus all accrued penalties and interest) in smaller, monthly payments. Partial Pay Installment Agreements do not require the taxpayer to settle the debt in full. To qualify for a Partial Pay Installment Agreement, the taxpayer must complete required financial statement disclosures to prove the taxpayer’s inability to full pay the debt.
When does an IRS payment plan start?
The installment agreement’s payments typically begin the following month after the IRS accepts the agreement. The payments will begin on the day of the month which you picked when you submitted the installment agreement request.
When Filing Back Taxes, What Address Should I Use?
You should list your current legal address. The IRS will send you letters, documentation, and refund checks to the address you display on the tax return. You should never file a tax return using an address that you do not live at or cannot receive mail at.
What do I do if I can’t pay the IRS installment agreement?
Will the IRS defer installment payments?
If you find that you can’t pay the IRS installment agreement amount, contact the IRS at 1-800-829-1040 as soon as possible. The IRS will typically allow you to skip one payment a year. If you believe that you will have difficulty making the payments in the future due to a change in circumstances, you may be eligible to modify the payment agreement or qualify for Currently Not Collectible status. Do your best to avoid defaulting on your installment agreement.
Can you have multiple IRS payment plans?
No, you can not have multiple IRS payment plans. If you are in a current payment plan and find that you owe taxes for a future period that you can not pay, it is best to modify your payment plan to include the additional tax that you can not pay.
Are IRS payment plans interest-free?
No, IRS payment plans are not interest-free. IRS Installment Agreements will accrue both late payment interest and late payment penalties while you are in the installment plan. Even though the installment plan will not reduce the penalties and interest from accruing, the installment agreement gives you time to pay off your tax debt while also avoiding rigorous IRS enforcement action.
How long are IRS installment agreements?
The maximum length of an IRS installment agreement is equal to the number of months the IRS must collect on a tax debt. To determine this, you must first determine the Collection Statute Expiration Date, commonly referred to as CSED; generally, the IRS has 10 years from the time that the tax return was due or filed, whichever is longer. A tax professional can help you determine the CSED date.
Will the IRS reinstate an installment agreement after I defaulted?
Generally, if you act quickly enough, the IRS will reinstate an installment agreement after it is defaulted. The IRS will typically require that the missed payments be caught up, and they may also require additional penalties or fees to be paid. If a taxpayer waits too long after the IRS declares that you defaulted on the installment agreement, you may need to reapply for a new one. The IRS will be more stringent on the new application and may require additional financial disclosure documents.
Can the IRS file a lien if I have an Installment Agreement?
Yes, the IRS can file a lien on your assets even if you have an installment agreement. In fact, it is customary for the IRS to automatically do this if your tax debt is over $50,000. A lien is not considered an enforcement action. Instead, a lien is considered to be the government’s way to protect themselves that you do not liquidate substantial assets to avoid paying the IRS. There can be ways to avoid a lien filing legally. Pink Harbor, CPA can evaluate your circumstances to determine if it is possible to persuade the IRS not to file a lien.
I can’t afford to make the minimum payments the IRS requires under a payment plan. What can I do?
There are many alternatives other than paying the IRS all at once, or ever. They include an Offer-in-Compromise, Innocent Spouse Relief, Injured Spouse Relief, Penalty and Interest Abatement,and Currently Not Collectible Status (CNC).Pink Harbor CPA is poised to properly assist you with evaluating which option is best for you.
