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IRS Payment Plans – How They Work

If you owe debt to the IRS and cannot pay in full a payment plan or IRS installment agreement may be negotiated. While this may be a good option for you to avoid wage garnishment, tax levies, etc., generally the faster you pay off the debt the less fees and penalties you will be subjected to. Interest on these plans is usually 8% to 10% per year. If you owe $25,000 or less, you should be able to get an installment plan  for 60 months, no questions asked. If you owe more than $25,000, you will have to negotiate with the IRS to get an installment plan.

Negotiating an Installment Agreement With the IRS

If you do Owe more than $25,000 the negotiating will begin with an IRS collector analyzing your Collection Information Statement on Form 433-A. This form will be used to determine the amount you are eligible to pay. When you fill out the form you should never agree to pay more than you can afford just to get your plan approved. When negotiating, you should offer to pay the amount of your income minus your necessary living expenses. If the IRS approves an installment agreement, it may take several months to notify you, but it is a good idea to send a first payment ( and 2nd and 3rd and so on) until the IRS notifies you of its decision. If your offer was refused, the payments will still go to your unsettled tax debt.

If the IRS did refuse your offer, it is probably because they don’t consider all of your living expenses necessary. Not that you should give up everything, but try and be a little flexible here. Also, if the information you provided on form 433-A was inaccurate or you failed on a different installment agreement you may also be refused your payment plan. If your first offer was rejected, for whatever reason, you may continue to negotiate. The amount you offer is up to you, but be realistic. If you get the installment plan approved there are a few things that can have it revoked such as:

  • You fail to file your tax returns
  • You miss a payment (if you do miss a payment you should notify the IRS ASAP)
  • It is discovered that your installment agreement was filed under false pretenses

IRS Fees Associated With IRS Agreement Plans

The user fee for new installment agreements is $105 and $52 for agreements where payments are deducted directly from your bank account. Taxpayers with income at or below established levels, can apply for a reduced fee of $43. Information about requesting the reduced user fee will be included in installment agreement acceptance letter sent to individuals.

There is also a user fee of $45 for reinstating defaulted agreements or restructuring existing agreements. If you already have an approved installment agreement from a previous tax debt and your financial situation has changed, we may be able to modify or restructure your installment agreement to include additional amounts owed into one agreement.

Professional Help With IRS Payment Plans

If you don’t feel comfortable negotiating a debt payment plan with the IRS or aren’t’ sure if it is the best option for you you should contact a tax lawyer who has experience dealing with IRS. A lawyer with this experience can be helpful in the regard of knowing exactly what steps you should take because of your individual situation. They may be able to help you avoid a great deal of hassle and may help avoid additional fines and interest, or even such penalties that you may not be obligated to serve in the first place.

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