Installment Agreements or IRS Payment Plans

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How can an IRS payment plan help?

If you are unable to pay your entire tax bill when it is due, IRS Installment Agreements or IRS payment plans, can help you pay off your tax debt over a period of time in the form of an installment agreement.

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Typically, IRS Installment Agreements takes five years or less to complete. The monthly payments are based on how much you owe and how much you can afford to pay each month. The IRS may grant extensions to your installment agreement under certain conditions.

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An Installment Agreement (IA) with the IRS is a great solution for taxpayers who can afford to fully pay their tax debts if allowed to spread out the payments over several years. It is an alternative if you do not qualify for an Offer in Compromise. The IRS charges interest and an application fee when they accept tax payment by way of IRS payment plans, but these plans can help you resolve your inability to fully pay your taxes in one payment.

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In order to qualify for a payment plan with the IRS you must meet the following rules and provide the IRS with this information:

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• You must have filed all tax returns (It’s OK to owe money but you must file)

• You may need to disclose all assets including all cash and bank accounts

• You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS

• You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home)

• You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA’s or 401K’s

• The total dollar amount you owe usually dictates with whom the negotiations will be handled

• Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $25,000

• The IRS will ask you to complete a personal financial statement and if a business is involved, you will also need a business financial statement

• The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses

• The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis