IRS Installment Penalty Agreement

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Understanding IRS Installment Penalty Agreement in Depth: Know from IRS Experts!

An IRS Installment Penalty Agreement is a type of agreement you make with the IRS to pay off your tax debt over a period of time, rather than in one lump sum. It is beneficial for those who are unable to pay off their tax debt all at once, making it a commonly used method for settling tax debts.

It is just an official arrangement with the IRS that allows you to pay your tax debt in smaller, more manageable monthly installments. The IRS provides different types of installment agreements, such as guaranteed, streamlined, and non-streamlined, each designed to suit varying financial situations and debt amounts. We’ll come to that later.

Just so you know, interests and penalties will continue to accrue until the debt is fully paid. Therefore, it is advisable to pay off the debt as quickly as possible and to remain compliant with all tax laws and terms of the agreement.

Understand the Eligibility: Who can qualify for an IRS Installment Penalty Agreement?

The IRS offers different installment agreement options depending on the taxpayer’s ability to pay and the amount of tax debt. The following are some of the eligibility requirements for an IRS installment agreement:

Filed all required tax returns. You must have filed all of your required tax returns on time.

Unable to pay the tax debt in full. You must be able to show that you are unable to pay the full amount of tax debt when it is due.

Agree to pay the full amount of tax debt, including interest and penalties, over a period of time. You must agree to pay the full amount of your tax debt, including interest and penalties, over a period of time.

Agree to pay a monthly payment that is affordable for you. You must agree to pay a monthly payment that is affordable for you.

Agree to keep the IRS updated on your financial situation. You must agree to keep the IRS updated on your financial situation so that they can determine if you are still able to make the monthly payments.

The IRS may also consider other factors when deciding whether to approve an installment agreement, such as your past payment history and your ability to repay the debt.

Installment Agreement made easy. Have a direct conversation with Prime Tax Solutions’ former IRS tax specialists to discuss your next steps.

Know the Installment Agreement Options you can Avail with PTS!

Here are some of the installment agreement options that we can help you avail with the Internal Revenue Service (IRS):

Streamlined Installment Agreement

This is the most common type of installment agreement and is available to taxpayers who owe less than $50,000. There is no down payment required and the IRS does not require financial statements. However, taxpayers must agree to pay off the debt within 72 months.

Guaranteed Installment Agreement

This type of installment agreement is available to taxpayers who owe less than $25,000. There is no down payment required and the IRS does not require financial statements. However, taxpayers must agree to pay off the debt within 36 months.

Direct Debit Installment Agreement

This type of installment agreement requires taxpayers to set up a direct debit from their bank account to make monthly payments to the IRS. This type of agreement may be approved even if you owe more than $50,000.

Short-Term Installment Agreement

This type of installment agreement is available to taxpayers who need to make payments for a shorter period of time, such as 12 or 24 months. This type of agreement may require a downpayment and financial statements.

Partial Payment Installment Agreement

This type of installment agreement allows taxpayers to pay less than the full amount of their tax debt. This type of agreement may require a downpayment and financial statements.

Struggling to pay your taxes? Get in touch with our expert CPAs for a FREE consultation. Get a payment plan that you can afford.

Benefits of an IRS Installment Penalty Agreement:
What do you get?

An IRS Installment Agreement can be a lifesaver when you’re facing a mountain of tax debt. Here are some of the key benefits:

1. Manageable Payments instead of Lump-Sum

The primary benefit of setting up payment plans with the IRS is that it breaks down your tax debt into smaller, more manageable monthly payments. This means you won’t have to empty your savings or take out a loan to pay off your tax debt all at once.

2. Prevents Collection Actions from IRS

Once you’ve set up an installment agreement, the IRS will stop any collection actions like wage garnishments, bank levies, or tax liens, as long as you stick to the terms of your agreement.

3. Full Flexibility

The IRS offers different types of installment agreements, each with its own set of criteria and terms. This allows you to choose a plan that best fits your financial situation.

4. Prevents Additional Penalties

By entering into an installment agreement and making your payments on time, you can prevent the accrual of additional failure-to-pay penalties.

Easier than You Think

Many people are intimidated by the thought of calling the IRS to set up a payment plan, but the process is usually quite simple. You can apply online, by phone, or by mailing a form to the IRS.

While an installment agreement can be incredibly helpful, it’s not a free pass. Interest and penalties will continue to accrue on your unpaid balance until your debt is paid in full. It’s always in your best interest to pay off your debt as quickly as possible.

Apply for an IRS Installment Penalty Agreement with Prime Tax Solutions

Determine Your Eligibility

Before you can get on a payment plan with the IRS, you must file all required tax returns.

Understand Your Debt

Know the total amount of tax debt you owe. This will help you decide which type of installment agreement you qualify for.

Choose the Right Plan

The IRS offers several types of installment agreements. For instance, if you owe $50,000 or less in combined tax, penalties, and interest, you can apply for a streamlined installment agreement. If you owe more, you will need to apply for a non-streamlined agreement.

Apply for the Installment Agreement

You can apply for an installment agreement with the IRS online, by phone, or by mail.

Online: If you owe $50,000 or less, you can apply online using the IRS Online Payment Agreement tool.

By Phone: Call the IRS at the phone number listed on your tax bill.

By Mail : Complete Form 9465, Installment Agreement Request, and mail it to the IRS address listed on your tax bill.

Set Up Your Payment Method

Decide how you want to make your payments. You can pay by check, money order, credit card, debit card, or direct debit from your bank account.

Stay Compliant

After setting up your installment agreement with the IRS, it’s essential to make all your payments on time and file all future tax returns timely.

Taxpayer:
“What happens if I miss a payment on my IRS Installment Penalty Agreement?”

If you miss a payment on your IRS Installment Penalty Agreement, the IRS may revoke the agreement and take collection actions. These actions may include wage garnishment, bank levies, and property seizures. But, don’t worry. We’re with you. Avoid missing any IRS payments with PTS!

Other Options if You Cannot Pay Your Taxes

If you cannot afford to pay your taxes, you may have other options, such as:

A payment plan

You may be able to set up a payment plan with the IRS to pay your tax debt over time.

A Currently Not Collectible (CNC) status

The IRS may grant you CNC status if you cannot afford to pay your tax debt and you are unable to set up a payment plan. CNC status will stop the IRS from taking collection actions, but you will still owe the full amount of your tax debt.

Bankruptcy

You may be able to discharge your tax debt in bankruptcy, but this is a complex process and should only be considered as a last resort.

FAQs about Installment Penalty Agreements

What is an IRS Installment Agreement?

An IRS Installment Agreement is a payment plan that allows taxpayers to pay their tax debt over a period of time, rather than in one lump sum. This can be helpful for individuals who are unable to pay their entire tax bill at once.

How can I set up an Installment Agreement?

To set up an Installment Agreement with the IRS, you can apply online using the IRS Online Payment Agreement application if you owe $50,000 or less in combined tax, penalties, and interest. If you owe more than $50,000, you will need to complete Form 9465, Installment Agreement Request, and mail it to the IRS. You may also consider consulting a tax professional for assistance.

What are the fees associated with an Installment Agreement?

The IRS charges a fee to set up an Installment Agreement. As of 2023, the fee is $31 for online applications, $107 for agreements made by phone, mail, or in-person, and $225 for agreements set up with a direct debit from your bank account. Low-income taxpayers may qualify for reduced fees.

Are there penalties and interest on the tax debt while I'm on an Installment Agreement?

Yes, penalties and interest will continue to accrue on your unpaid balance until the entire tax debt is paid off. However, the IRS may reduce the failure-to-pay penalty while you are making installment payments.

Can the IRS terminate my Installment Agreement?

Yes, the IRS can terminate your Installment Agreement if you fail to make the required payments on time, fail to pay another tax liability when it is due, or if the IRS finds that your financial condition has improved significantly and you can pay the liability in full.

What should I do if I can't make a payment?

If you are unable to make a payment on your Installment Agreement, it is important to contact the IRS as soon as possible. The IRS may be able to modify your agreement or provide other options to help you avoid defaulting on the agreement.

Can I pay off my Installment Agreement early?

Yes, you can pay off your Installment Agreement early by paying the full amount you owe at any time. There is no penalty for paying off your Installment Agreement early.