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When the IRS has determined that you have an outstanding balance, they will sometimes accommodate your situation by offering installment agreements, or payment plans, in order to collect. These payment plans are exactly what they sound like – agreements for you to pay down your tax liability through regular payments. These plans are not for everyone, though; there are eligibility requirements for these payment plans.
Before you apply, make sure that you are currently in compliance with the IRS. How do you know if you are compliant? If you have filed all tax returns on time and are up-to-date on your previous tax obligations, then you are most likely in compliance.
Short-Term Payment Plan Agreements
Payment plans that are completed in less than 120 days are considered “short-term) plans. To be eligible for a short-term plan, you may not owe more than $100,000 to the IRS (this includes tax, penalties, and interest).
Long-Term Payment Plan Agreements
Payment agreements that last longer than 120 days are considered long-term. The maximum amount of time allowed on these plans is usually 72 months. The IRS will determine how much you can afford to pay on a monthly basis based on a detailed and thorough analysis of your financial situation. They will look at your assets, as well as your average monthly income and expenses.
Application and Payment
If you meet certain requirements, you can apply online for short-term or long-term plans. Only individuals may apply online for a short-term plan, for which there are no setup fees. However, there are costs associated with initiating a long-term plan. Applying for a long-term plan in person can cost as much as $225 to set up.
After the IRS has accepted your payment plan, you must choose the payment method. Fortunately, the IRS allows you to pay by conveniently setting up your bank account to automatically withdraw funds. You may also choose to pay by mailing a check, manually paying from a credit or debit card, or sending a money order. However, there are fees assessed when paying a long-term plan with a debit or credit card.
Modifications
If, for some reason, you need to request a modification to your payment plan, you may usually do so online. This only applies to manual methods of payment, though. Automatic withdrawals from your bank account mandate that you contact the IRS to modify your payment plan.
ConclusionThe IRS has a reputation for being unflinchingly rigid, but there may be a handful of options if you are unable to immediately pay your tax obligations in full. A payment plan may be an option for you, but it is always advisable to consult with a legal team experienced in dealing with the IRS. Please reach out to Weisberg Kainen Mark today to see how we can help provide a solution to your situation.
Weisberg Kainen Mark, PL
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