Are you struggling to pay your taxes and worried about the IRS? An Installment Agreement may be the right resolution for you. Installment Agreements are great options for taxpayers who cannot make large payments all at once. These resolutions allow you to pay your taxes as you would for a house or car – in monthly installments! If you’re interested in an Installment Agreement, call us at 844-841-9587, or click the CONTACT US button below to fill out the form so we can reach out to you!
Each unpaid tax year has its own deadline for when the IRS can no longer collect on it based on when the taxes were assessed. This is often referred to as a Collection Statute Expiration Date (CSED). If you are closer to the end of the 10-year time limit, the Internal Revenue Service will probably become more aggressive in its attempts to collect money from you. If the IRS demands a payment plan that you know is not practical, you do NOT need to agree to that plan.
There is a formula used in many agreements with the IRS to determine your actual ability to pay. This formula helps set your monthly disposable income. The IRS will use this to help set a realistic monthly amount. There are monthly allowances for many categories that include your typical necessary items such as car payments, house payments, food, vehicle costs including maintenance and fuel, life insurance, health insurance, etc. Form 433A also asks for any assets such as investments, real estate, and vehicle information such as make, model, mileage, and creditor.
All of these pieces of information help the IRS determine what it thinks you can pay back. And while this is a formula the IRS often follows, do not be surprised if they push back and try to disallow expenses. If you are attempting to set up your own Installment Agreement, be prepared for some aggressive negotiations and explanations for any expenses they find questionable.
How much you owe through your payment plan will be determined by how much you owe in back taxes and how much time you plan on taking to pay it back. The following list shows what type of installment plan you qualify for based on the amount of money you owe:
- $10,000 or below: Pay off your balance within three years with no minimum payment amount required.
- $10,000 to $25,000: You may qualify for a streamlined installment plan where your minimum payment is determined by your total amount owed divided by 72 months.
- $25,000 to $50,000: Your minimum payment will be your total balance due divided by 72 months, and you must fill out a Form 9465-FS.
- $50,000 and above: The IRS will conduct a thorough review of your finances with detailed information on your income, investments, assets and bank accounts. Your minimum payment will be unique to the settlement you determine with the IRS.
After setting up an IRS payment plan, you will still owe a 0.5% monthly penalty, plus quarterly interest for the amount that accrues while you’re paying back your balance. With interest rates like this, setting up an IRS payment plan is almost always more affordable than taking out a loan or putting the balance on your credit card. It will always be in your best interest to set up a payment plan directly with the IRS rather than pay higher interest rates by taking out money elsewhere.
It is important to set an installment agreement that you can afford pay for the entire period. If you default and are unable to make payments, you go back to square one, wiping out any previous work to settle your taxes!
If not having a lien on your house or property is the most important part of your resolution, an installment agreement will probably not be your best choice. Even if you have agreed to terms that won’t fully pay your balance, your unpaid taxes will continue to collect interest and penalties until they expire. BUT the notices threatening wage garnishments, wage levies, and bank levies will stop with an installment agreement!
Receive a Consultation for the Best Financial Solution
If your primary goal is to set up an affordable resolution that will keep the IRS from threatening you with more wage or bank levies, an installment agreement could be the right resolution for you! To find your best resolution, fill out the confidential consultation request below or call 844-841-9857!