IRS installment agreement
An IRS installment agreement can stop the IRS from filing a Notice of Federal Lien. The IRS can’t seize your property or wages while an IRS installment agreement request is pending. But, all tax returns must be filed and all assets disclosed (e.g. cash and bank accounts). The interest may be deductible if you borrow from a second mortgage or a home equity line of credit to pay the agreement.
An IRS installment agreement is the most widely used method for paying an old IRS debt. If you owe $50,000 or less, you should be able to get an installment payment plan for 72 months just by asking for it. If you owe more than $50,000, you will have to negotiate with the IRS to get one and provide financial information. As part of its Fresh Start program, the IRS recently adopted new rules making it easier to obtain an installment agreement. The threshold for qualifying for an installment agreement without having to provide financial information was increased from $25,000 to the current $50,000 amount and the timeline for paying was increased to 72 months from 60 months.
Does the IRS have affordable payment plans? You can make monthly payments through an IRS installment agreement if you’re not financially able to pay your tax debt immediately. However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full. Before you apply:
- File all required tax returns;
- Consider other sources (loan or credit card) to pay your tax debt in full to save money;
- Determine the largest monthly payment you can make ($25 minimum);
- Know that your future refunds will be applied to your tax debt until it is paid in full;
- Evaluate whether you need tax planning to keep this situation from reoccurring
- Contact a tax professional to help you with the process.
Guaranteed IRS installment agreement
Your request for an IRS installment agreement cannot be turned down if the tax you owe is not more than $10,000 and all three of the following apply.
- During the past 5 tax years, you (and your spouse if filing a joint return) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment agreement for payment of income tax.
- The IRS determines that you cannot pay the tax owed in full when it is due and you give the IRS any information needed to make that determination.
- You agree to pay the full amount you owe within 3 years and to comply with the tax laws while the agreement is in effect.