Are you struggling to pay your taxes in full by the deadline? Don`t worry, you`re not alone. The good news is that the IRS offers several payment options, including an installment agreement. Here`s what you need to know about the IRS Form Installment Agreement.
What is an installment agreement?
An installment agreement is a payment plan that allows you to pay your tax debt over time instead of all at once. It`s important to note that interest and penalties will still accrue on the unpaid balance until it`s paid in full. However, the installment agreement can help you avoid some of the more severe consequences of not paying your taxes, such as a tax lien or wage garnishment.
How to apply for an installment agreement
To apply for an installment agreement, you`ll need to complete IRS Form 9465, Installment Agreement Request. You can either file the form electronically via the IRS website or by mail. The application fee is $31 for a long-term plan or $149 for a short-term plan. However, low-income taxpayers may qualify for a reduced fee of $43.
Types of installment agreements
There are two types of installment agreements available: short-term and long-term. Short-term agreements allow you to pay your tax debt over 120 days or less, without an application fee. Long-term agreements allow you to pay over more than 120 days, up to six years, with a fixed monthly payment. The minimum monthly payment for a long-term agreement is usually $25.
Qualifying for an installment agreement
To qualify for an installment agreement, you must meet certain criteria, including:
– Owning less than $50,000 in combined tax, interest, and penalties
– Filing all required tax returns
– Not having an open bankruptcy case
– Being able to pay the proposed installment amount
If you owe more than $50,000, you can still apply for an installment agreement, but you`ll need to provide additional financial information to the IRS.
Consequences of defaulting on an installment agreement
If you default on an installment agreement, the IRS can take several actions, such as revoking the agreement, filing a tax lien against your property, or pursuing wage garnishment. Therefore, it`s essential to make your payments on time and in full to avoid these consequences.
Conclusion
An installment agreement can be an excellent option if you`re unable to pay your taxes in full by the deadline. However, it`s essential to understand the requirements and consequences of such an agreement before applying. Consider consulting with a tax professional or using the IRS`s online payment agreement tool to explore your options.