Posted by The TaxAdvocate Group, LLC

Facts About IRS Installment Agreement (Repayment Plans)

Facts About IRS Installment Agreement (Repayment Plans)

When you have delays in paying income tax, the IRS may allow you to set up a repayment plan, called an installment agreement, to get you back on track. However, it is up to you to take the first step and request the installment payment, which can be done through Form 9465. You can submit the form along with the tax return online or even over the phone in some cases. But before you apply, you need to have accurate information about IRS payment plans.


What is an IRS repayment plan?

An IRS repayment plan is an agreement made directly with the agency to pay federal taxes within a certain period. There are two types of IRS repayment plans: short-term and long-term.

You will usually make monthly payments to pay off what you owe. As long as you comply, the IRS will not garnish your wages or confiscate your bank accounts or property. But enrolling in an Internal Revenue Service (IRS) repayment plan does not exempt you from interest and late fees; they accumulate until the balance is zero.


Who is eligible for an IRS repayment plan?

You don't need to call the Internal Revenue Service to sign up for a payment plan. You can apply online if you find yourself in any of the following situations:

  • Applying for a long-term repayment plan, you owe $50,000 or less in combined taxes, penalties, and interest, and you have filed all your tax returns.

  • Applying for a short-term payment plan and owing less than $100,000 in taxes, penalties, and interest combined.

You will have to confirm your identity, which means you have the following information:

  • A valid e-mail address.

  • Address from the last tax filed return.

  • Balance of amount due.

  • Date of birth

  • Mobile phone, financial account number registered in your name, or activation code received by mail (duration 5 to 10 working days).

  • Marital status.

  • Name exactly as it appears on the last completed tax return.

  • Your social security number or your tax ID number.

This is a potential time-saver - if you've already signed up for a tax transcript, ID protection PIN, or other online payment agreement, you can probably log in with the same ID and password.


10-year collection period

By law, the IRS has only ten years from the date the income tax was collected to collect it. For example, if you reported a pending tax invoice on your 2020 tax return on June 23, 2021, in most cases, the IRS has until June 23, 2031, to collect the tax from you. Therefore, the IRS will charge monthly payment amounts that are large enough to pay the full tax at the end of the ten years. If you completely ignore the tax bill, the IRS can make sure that the taxes you owe are collected through payroll or by placing liens on your properties.


Guaranteed acceptance of your installment agreement

If your unpaid tax balance is $10,000 or less at the time of the installment agreement request, IRS acceptance of the proposed payment plan can be guaranteed if certain requirements are met.

To be eligible, within the last five tax years, you must have completed all tax returns on time, paid income tax owed, and not requested an installment payment. In addition, the IRS must conclude that full payment of the royalty is not possible based on the information provided. Also, you must agree to comply with all tax laws when agreeing to installment, and you must agree to pay your tax debt within three years.


Fee for an installment agreement

The IRS charges utility fees to establish or reinstate an installment agreement.


Interest and penalties will continue to apply.

Entering an installment agreement can give you peace of mind, as the IRS will not apply any of the strictest collection methods available. Still, interest and penalties will continue to accrue on outstanding balances and unpaid taxes. This is because the payment of the unpaid tax balance is still unpaid, even if you try to pay the bill through a monthly payment plan. Because of the penalties and interest, paying as much as possible each month; otherwise, it will take longer to pay off the debt in full.


If you owe more than $50,000 in taxes

If the amount of tax payable when you request an installment agreement exceeds $50,000, you will need to provide the Internal Revenue with additional information about your personal finances. In such a case as this, you must request the payment plan on form 9465-FS and attach a statement of billing information on form 433-F. The IRS will conduct a more in-depth review of your assets and liabilities to determine if you qualify for an installment agreement.


Can I subscribe to an IRS installment plan by myself?

Yes. You don't have to pay a third party to request a repayment plan.

If you hire a tax-relief company or enlist the services of a tax professional to help you pay off your debt, you may need to provide them with a power of attorney to apply for an IRS payment plan on your behalf. You need to proceed with caution, as the Federal Trade Commission warns.

The truth is that most taxpayers are not eligible for the programs supported by these scammers; their companies do not pay their tax debt and, in many cases, do not even send the necessary documents to the IRS to apply for the repayment plan. Some of these companies don't offer repayments and leave people even more in debt to make matters worse.


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