Real Installment Agreement Options
Just because you received enough income to create a tax debt, doesn't mean you have the money now to pay it all. Don't fret over how you will pay the taxes you owe the IRS, because the IRS offers an Installment Agreement plan for many different situations. This page will discuss a few payment options and help you decide if entering into an Installment Agreement is the right choice for you.
Extension to PayWill you have the money to pay your tax debt in the next few months, but circumstances are preventing you from paying before April 15th? Requesting an extension of time to pay may be a better option than entering a monthly Installment Agreement. Depending on your situation, the IRS will give you 30 to 120 days to pay your debt. You will pay far less in penalties and interest. You can apply by filing a Form 1127 or on the IRS website.
Installment Agreement Options
Non-Disclosure Installment AgreementIf you owe less than $25,000, you don't have to fill out a lot of paperwork or disclose your personal finances. Simply fill out a Form 9465 or apply online. For this Installment Agreement, your monthly payments are based off one of two calculations.
- The debt divided by 60 for debts that have five or more years before they expire.
- The debt divided by the months left before expiration, if you have less than five years.
Full Disclosure Installment AgreementIf you owe more than $25,000 or need lower payments, also send a Form 433-F. This form fully discloses your finances to give the IRS an idea of what Installment Agreement you can afford. The IRS will be looking for:
- Any financial accounts that you can withdraw or borrow from.
- Any property that you own, your equity in it, and its value.
- Any lines of credit you have, their balances, and their values.
- Credit card limits, balances owed, and minimum payments.
- All sources of income that your entire household brings in.
- Bills the IRS considers necessary for living, detailed on the 433-F.
Tiered Installment AgreementIf you believe your financial situation will improve in a year but is bleak now, you should consider a Tiered Installment Agreement for debts under $25,000. In a Tiered Installment Agreement, you set a low monthly payment for the first year, and then it goes up for the next four years. To calculate what you will pay after your first year of payments, subtract the total that would be paid that first year from your total tax debt and divide that by 48 months.
Rules That Apply to Every Installment Agreement
- You will be charged a set up fee of $105, $52, or $43 depending on certain factors.
- Penalties and Interest will continue to accrue until the debt is paid off in full.
- Pay at least the agreed amount per month on time or the Installment Agreement defaults.
- File and pay all future taxes on time or the Installment Agreement defaults.
- You are still subject to liens while in an Installment Agreement for a debt over $25,000.
If you want to enter an Installment Agreement and owe more than $10,000, it is highly recommended that you seek help from a tax professional. The IRS is known to pressure taxpayers into unaffordable payments. If you feel you may default for any reason, you should definitely contact a tax professional. Defaulting an Installment Agreement prompts the IRS to immediately begin levies and garnishments.
Wondering if an Installment Agreement could work for you? Consult a professional. Call now or fill out the form below for a free tax debt consultation on whether an Installment Agreement is the right choice for you! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.