If you cannot pay the IRS in full, but will have the money to do so over time, you can request an IRS installment agreement. This is a way to pay your debt over the course of many months instead of being forced to part with a large lump sum upfront. The more you know about an IRS installment agreement and how it works the better chance there is that you will rely on this if the time ever calls for it.
There are many different types of IRS installment agreements. To go along with this, it is important to be aware of the requirements of each one. Even though most can receive an installment agreement from the IRS, it is not guaranteed.
First off, an installment agreement is the most common way for a taxpayer to pay debt to the IRS. If you owe less than $25k it is usually very easy to receive an IRS installment agreement. If you owe more than this it can often times be difficult to receive a payment plan – although it is far from impossible.
To get started, you need to fill out and submit an Installment Agreement Request Form, IRS Form 9465. Even if you do not know much about the tax code you should be able to accurately fill out this form. Most of the information pertains to your particular tax situation, and does not require that you know much else.
You have other options for setting up an IRS installment agreement. You can use the internet using the Online Payment Agreement Application. Or you can get started over the phone, and complete everything else once it arrives in the mail.
Within 30 days of receiving your request the IRS will either accept or deny your installment agreement. In some cases, the IRS has to accept your offer. This is when you owe less than $25k, and your monthly payments will allow you to get rid of your debt in five years or less.
If you owe more than $25K in tax debt to the IRS it is likely that they will require more financial information from you in order to approve your installment agreement. The main difference between applying for an installment agreement when you owe over $25K is that you will be required to complete form 4330F, The Collection Information Statement. This document is a bit tedious to fill out and it requires that you provide the IRS with detailed information about your finances. The IRS is much more hesitant to approve installment agreements when over $25K is owed and it is highly suggested that you use a tax professional to help with your filing to ensure it is accepted by the IRS.
Installment agreements are a great settlement alternative offered by the IRS. If you cannot pay your taxes in full this is the one of the first types of settlements you should consider. If you cannot make the required monthly payments for an installment agreement then it is important to talk with a tax debt professional to come up with a different tax settlement method.
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