Can't Pay Taxes Owed? Setup a Payment Plan
IRS Installment Agreement The installment agreement is the most common form of payment plan. The IRS accepts more requests for this type of payment than any other.
When you qualify for an installment agreement you will be allowed to pay off the tax amount owed through monthly payments. The amount you pay monthly must be enough to pay off the entire balance of the taxes owed plus interest in a period of 3 years or less. You must be able to consistently make these payments or else the agreement will be cancelled and you will be charged with a new setup fee to re-enter into the agreement.
So you can't pay taxes owed to the IRS? Don't worry the IRS deals with thousands of individuals like yourself every year and they are very understanding of your financial situation. The IRS has created a few payment methods for individuals that cannot pay their taxes owed at the time they are due.
To apply for an installment agreement you must complete IRS form 9465 which is available on the IRS website or you can call the IRS and have them mail you the required form.
Also, you can use the Online Payment Agreement (OPA) to apply for installment agreement. If you owe greater than $25,000 you will be required to fill out a Collection Information Statement, Form 433F. If you cannot make the minimum payment required you may be able to qualify for the partial payment agreement.
If you owe less than $25,000 in taxes, the IRS will allow you to setup a payment plan without any questions. If you owe more than $25,000 they will just require you to file a bit more paper work to ensure your ability to make payments over time.
One thing to keep in mind before setting up a payment plan is that you will save the most money by paying in full because you will not be charged additional interest on the tax amount owed.
For those that cannot pay immediately, payment plans are available to allow the individual to pay the tax amount off in smaller, more manageable monthly payments. Below are the two most common forms of payment plans.
Partial Payment Installment Agreement The IRS realizes that sometimes individuals cannot make the minimum required payments with an Installment agreement and therefore they created the partial payment option. The IRS is not as cruel as everyone believes them to be, they do not want individuals to make payments greater than their financial situation will allow.
Out of all IRS filings, an installment agreement request is one of the easier filings to do. The difficult part of this filing is figuring out how much you want to make as a minimum monthly payment amount.
You have to realize that the lower amount you choose the more you will pay in total interest, but you also don't want to pay more than you can financially handle because if you miss one payment the IRS will cancel the agreement and they can take harsh collection actions against you.
Many times it is a good idea to consult a tax professional when setting up these agreements. Tax professionals will be able to analyze your financial situation and find the best payment method for you and complete the paper work to IRS specifications.
The IRS has a very automated way of collecting as much as they can in taxes and to throw off that automation you must prove your poor financial situation to them and they will make exceptions. In order to apply for the partial payment option you will need to fill out IRS form 9465, IRS Form 433-A, and write a letter saying that you are requesting the partial payment installment agreement option.
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