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Some Truth About IRS Installment Agreements

Some Truth About IRS Installment Agreements

Tax payment is pretty important and sure for everyone, and there is no escaping payment. However, there are times when one might not be able to meet up with the payment. Uncle Sam has some provisions in place for anyone who wants to have an agreement with them in tax payment. 

When you fail to remit your tax on time, the next best option is to come up with a payment plan called an installment agreement. The plan permits partial tax payments until it is completed but within certain years. The period is usually five to six years, but the IRS may give some cases an extended period like ten years. The installment agreement Form 9465 is submitted with your tax return online, on your phone, or IRS office. But before forwarding the request, here is some truth about the agreement.

There are four types of installment agreements:

  • Streamline agreement

  • Partial pay agreement

  • Tiered agreement

  • Full pay agreement

 

10-year Window for IRS

The law provides a period of 10 years for the IRS to collect the debt. The time starts from the day of a tax assessment to the calculated 10 years period. The agreement is usually run every month with a significant amount to arrive at the entire debt before the 10 year period. If you adamantly refuse to pay the tax, the payment will be withdrawn from wages or sale of your assets.

 

Guaranteed Installment Agreement

If you have less than $10,000 in tax debt when requesting an installment form, the office may accept your payment plan if the proposal meets certain requirements. First, the IRS will investigate to ensure you indeed are not financially capable of paying the full tax debt. Then, you'll agree to adhere to all laws regarding late payment and pay your debt within the given period.

 

Charges

There are some attached fees for requesting the form.

Accumulated Interest or Penalties 

Having this agreement means you are free from IRS collection headaches. But interest and penalties still apply. If you fail to pay on time, the interest and penalty will accumulate and add to your debt. The installment agreement form clarifies that the payment made is considered late payment. Though you're trying to pay your outstanding tax monthly, late payment charges still apply. So, it is best to pay your tax debt as fast and fat each month to avoid accruement of interest, making it challenging to pay in full within a given period.

 

Notice for more than $50,000 in tax debts

When issued the form for the tax debt of $50,000 and above, the IRS will request a record of your personal liabilities and assets. This request is given Form 9465-FS and submitted with the Collection Information Statement on Form 433-F. This information will be used to go through your payment plan before going through your personal property. After the review, a decision will be made on accepting or rejecting your payment plan.

 

Conclusion 

The tax payment system is designed to be easy, but requires strict compliance with IRS's requirements. If you hesitate to follow these requirements, the process will become tedious. The requirements are there to put you through the system without wasting time, saving you IRS harsh collection methods. 

Paying your tax to avoid a headache from the IRS is a smart move, but if you're unable to pay, you can set up an installment payment plan. It is easy to start a payment plan, follow the rules and make your payment on time. However, if you find it difficult to make your payment or follow the rules, hiring a professional will be fitting. A professional will iron out the installment agreement problems to your understanding and reveal any hidden message.

 

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