Getting into tax debt with the Internal Revenue Service (IRS) can be a daunting experience for many taxpayers. If you are unable to pay your tax debt in full, an installment agreement IRS request may be the solution for you.
What is an installment agreement?
An installment agreement is an agreement between you and the IRS to pay your tax debt in installments over time. This agreement allows you to pay what you owe in monthly payments that are more manageable for your budget. It also helps to keep the IRS from taking more aggressive steps to collect on your tax debt, such as wage garnishment or tax liens.
Who is eligible for an installment agreement?
Most taxpayers who owe less than $50,000 can apply for an installment agreement. However, if you owe more than $50,000, you will need to complete additional forms and provide financial statements to prove your ability to pay.
How to request an installment agreement with the IRS
To request an installment agreement, you can use the Online Payment Agreement (OPA) tool on the IRS website, or you can complete IRS Form 9465, Installment Agreement Request. The OPA tool is the easiest and fastest way to request an installment agreement if you owe $50,000 or less and can pay off your debt in 72 months or less. If you owe more than $50,000 or need more than 72 months to pay off your debt, you will need to complete Form 9465 and provide financial statements.
Before you request an installment agreement, it is important to know that the IRS will charge interest and penalties on your outstanding tax debt until it is paid in full. The current interest rate is 3% per year, compounded daily. In addition, the IRS will charge a fee for setting up an installment agreement. The fee ranges from $31 to $225, depending on your payment plan.
Benefits of an installment agreement
There are several benefits to requesting an installment agreement with the IRS, including:
1. You can avoid more aggressive collection action, such as wage garnishment or tax liens.
2. You can pay your tax debt in monthly installments that are more manageable for your budget.
3. You can avoid having to pay your entire tax debt at once, which may be financially impossible.
4. You can improve your credit score by paying off your tax debt over time.
Conclusion
If you are unable to pay your tax debt in full, an installment agreement IRS request may be the solution for you. It is important to know that the IRS charges interest and penalties on your outstanding tax debt until it is paid in full, and there is a fee for setting up an installment agreement. However, an installment agreement can help you avoid more aggressive collection action and pay your tax debt in monthly installments that are more manageable for your budget. If you are considering an installment agreement, it is important to consult with a tax professional to ensure that it is the best option for your financial situation.