The Internal Revenue Service has strict rules and regulations that must be followed to steer clear of tax problems. Failing to file your returns or paying taxes can attract a range of troublesome consequences, such as late fees, penalties, and jail time in some extreme cases. In instances where a taxpayer is unable to successfully repay their outstanding tax debt, the IRS offers a provision known as an ‘installment agreement.’ Continuing on the subject, in this post, we share a brief guide to tell you all you need to know about the IRS installment agreement. Read on.
What do you mean by IRS Installment Agreement or Payment Plan?
An IRS payment plan is basically an agreement between you and the IRS to allow you to pay your tax over a certain extended period. There are mainly two types of payment plans – short-term and long-term. While ensuring to make monthly payments for the owed amount guarantees that the IRS will not trouble you by seizing any accounts or property, you need to deal with the total due amount quickly, as penalties and interest are continuously being added to the due amount.
You can be eligible for an IRS installment agreement if you fall under any of the following categories:
- You are applying for a long-term payment plan and owe $50,000 or less, i.e. including all the penalties, interest, and other charges, while having filed all your tax returns.
- You are applying for a short-term payment plan and owe less than $100,000, i.e. including interest and penalties.
You will have to confirm your identity and are, therefore, required to keep a few things at hand, which includes but might not be limited to your name as on the most recent tax return filing, address, email address, date of birth, filing status, due amount, social security number, and your financial account number or registered mobile number.
Setup Costs of Different Payment Plans
The setup costs may vary depending on the payment plan you choose, the application method, and if you qualify for the agreement or not. Here is a breakdown of these costs as per the payment plans:
Short-Term Agreement (i.e. 180 Days or Less)
There are no charges for applying for a short-term agreement through your phone, mail, in-person or online mediums. You can make direct payments from your checking account, or through a money order or credit/debit card.
Long-Term Agreement (i.e. 120 Days or More)
If you make payments through automatic withdrawals, you need to pay $31 to apply online or $107 to apply through phone, mail, or in-person. This charge is waived for any low-income applicants. For individuals that pay by other methods, the setup fee is $149 to apply online or $225 to apply by phone, mail, or in-person. This charge is reduced to $43 for low-income applicants and can be reimbursed in some cases.
Other Terms and Conditions
- If you owe more than $25,000, you must make payments through direct debit, i.e. through automatic withdrawals.
- If you make payments with a credit or debit card, you have to pay $2 to $4 per payment through debit cards or 2% of the payment amount through a credit card.
If you are unable to pay your taxes on time, it is always better to apply for an IRS installment agreement than to let it grow and become too huge of a burden to deal with. If you or someone you know is looking to opt for IRS debt relief in Dallas, Fort Worth, and nearby places in Texas, get in touch with a reputable IRS attorney based out of Dallas for prompt problem resolution.