You can make monthly payments through an installment agreement if you’re not financially able to pay your tax debt immediately. However, you will still incur penalties and interest as well as a fee associated with setting up an installment agreement.
Before you apply:
- File all required tax returns;
- Consider other sources (loans or credit cards) to pay your tax debt in full to save money;
- Determine the largest monthly payment you can make ($25 minimum); and
- Know that your future refunds will be applied to your tax debt until it is paid in full.
Fees for setting up an installment agreement:
- $52 for a direct debit agreement;
- $105 for a standard agreement or payroll deduction agreement; or
- $43 if your income is below a certain level.
Understand your agreement, avoid default
To keep your account in good standing:
- Pay at least your minimum monthly payment when it’s due (direct debit or payroll deductions make this easy);
- Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
- File all required tax returns on time;
- Pay all taxes you owe in full and on time (contact the IRS if you cannot);
- Continue to make all scheduled payments even if your refund is applied to your account balance; and
- Ensure your statement is sent to the correct address, (contact the IRS if you move).
If you don’t receive your statement, send your payment to the address listed in your agreement.
There may be a reinstatement fee if your agreement goes into default. Penalties and interest continue to accrue until your balance is paid in full. If you are in danger of defaulting on your payment agreement for any reason, contact the IRS immediately.
The IRS will generally not take enforced collection actions:
- When an installment agreement is being considered;
- While an agreement is in effect;
- For 30 days after a request is rejected, or
- During the period the IRS evaluates an appeal of a rejected or terminated agreement.
Lefstein-Suchoff CPA & Associates has tremendous experience with helping those with back taxes, and tax debt issues. Payment plans and installment agreements are one of our many areas that we help our clients with. For the best strategy to help you with your IRS tax problems please contact us at 201-947-8081 or 646-688-2807, or email us at info@irstaxproblems.com.
