There are other options if you qualify but let’s start with what you should do if at all possible when you first realize you cannot pay your full tax bill when you file your taxes. The first thing you can do right after you file is to apply for an installment plan with the IRS. This allows you to pay your taxes over time, in monthly payments. If you want to explore other collections negotiation options you can do that as well but it is best to seek the advice and help of a resolution professional. Attempting to discuss the depth and breadth of tax resolution options will most likely cause more confusion in this article. So we will discuss those options in future posts rather than trying to boil the whole ocean in this one post. So for now….let’s talk about installment agreements.
How long must I wait to apply to set up an installment agreement after I file my taxes?
You can apply to set up an installment agreement with the IRS as soon as you file your taxes. There is no waiting period. However, the IRS will not process your application until you have filed all of your required tax returns and paid any estimated taxes that are due.
What types of installment plans are available?
There are several different types of installment plans available, depending on your circumstances. Some of the most common types include:
- Guaranteed Installment Agreements: These agreements are available to individuals who owe less than $10,000 in taxes and who meet certain other criteria. You can set up a guaranteed installment agreement online, by phone, or by mail.
- Streamlined Installment Agreements: These agreements are available to individuals and businesses who owe less than $50,000 in taxes and who meet certain other criteria. You can also set up a streamlined installment agreement online, by phone, or by mail.
- Partial Pay Agreements: These agreements are available to individuals and businesses who owe more than $50,000 in taxes and who cannot afford to pay the full amount immediately. You will need to work with the IRS to negotiate a payment plan that is affordable for you.
- Routine Installment Agreements: These agreements are available to individuals and businesses who do not qualify for any of the other types of installment plans. You will need to work with the IRS to negotiate a payment plan that is affordable for you.
What do I need to do to set up an installment plan?
To set up an installment plan, you will need to contact the IRS. You can do this online, by phone, or by mail. You will need to provide the IRS with some basic information, such as your name, address, Social Security number, and the amount of taxes you owe. You may also need to provide the IRS with some financial information, such as your income and expenses.
Phone: 1-800-829-1040 ***NOTE: If you are calling and want to ask for longer than 72 months or if you owe more than $50,000 you should prepare Form 433-F for an individual or Form 433-B for a business. You will need this information prepared when talking to the IRS.
Mail : First complete the IRS Form 9465, Installment Agreement Request and the Form 433-F Collection Information Statement OR Form 433-B Collection Information Statement for Businesses , as applicable, and submit with all the required backup documents to the address in the Instructions for Form 9465.
How much will I pay each month?
The amount you pay each month will depend on the type of installment plan you have and the amount of taxes you owe. You may be required to substantiate your financials claims but the IRS will most likely work with you to create a payment plan that is affordable for you.
What happens if I miss a payment?
If you miss a payment, the IRS may terminate your installment agreement. This means that you will be required to pay the full amount of your taxes immediately. If this happens to you you may be able to renegotiate your installment agreement but you need to act quickly. You may also be charged additional penalties and interest.
How can I get help setting up an installment plan?
If you need help setting up an installment plan the IRS has a variety of resources available to help taxpayers, including a website, phone hotline, and walk-in offices. If you are worried about dealing with the IRS, tax resolution professionals can also help you understand your options and negotiate a payment plan with the IRS.
Additional things to keep in mind:
- The IRS will charge interest and penalties on your tax debt until it is paid in full. As today’s date, October 14, 2023 the interest rate set for installment agreements is 8%.
- Once you are in an installment agreement you will also still pay the failure to pay penalty but it is reduced by half from 0.50% down to 0.25%.
- You will need to file all of your future tax returns on time and pay all of your future taxes in full.
- The IRS may still file a Notice of Federal Tax Lien against you, even if you are on an installment plan.
- You may be able to appeal a decision by the IRS to reject or terminate your installment agreement.
If you are considering setting up an installment plan to pay your taxes due, it is important to understand your options and to make sure that you can afford the monthly payments.
If you owe more than you can pay you do need to take action quickly to avoid additional collections actions. You should either quickly apply for an installment agreement on your own or contact a tax resolution professional help you determine the best negotiation strategy for your situation.
Please understand that the IRS will charge you interest and penalties. The interest rate is based on the federal short-term rate, plus 3%. Currently set at 8%. The penalty for not paying your taxes on time is 0.50% of the unpaid balance for each month that it’s late, up to a maximum of 25%.
If you still don’t pay your taxes after the IRS has charged you interest and penalties, the IRS may take other enforcement actions, such as garnishing your wages or seizing your property.