If you owe money to the IRS and cannot afford to pay it all at once, there are options available to you. One of these options is an installment agreement, which allows you to pay off your tax debt over time. In this article, we will discuss what installment agreements with the IRS are and how they work.
What is an Installment Agreement?
An installment agreement is a payment plan that allows you to pay your tax debt over time. You will make monthly payments until your debt is paid in full. This is a good option if you cannot afford to pay your tax debt all at once.
How to Apply for an Installment Agreement
To apply for an installment agreement, you can either use the IRS Online Payment Agreement tool or fill out and mail in Form 9465, Installment Agreement Request. With the online tool, you can set up a payment plan for up to 72 months. If you need more time, you will need to fill out Form 9465 and mail it to the IRS. You will need to provide information about your income, expenses, and the amount of tax debt you owe.
Types of Installment Agreements
There are several types of installment agreements available, depending on the amount of tax debt you owe and your financial situation. These include:
1. Guaranteed Installment Agreement: If you owe less than $10,000, you can apply for a guaranteed installment agreement. This type of agreement is guaranteed by the IRS and does not require a financial statement.
2. Streamlined Installment Agreement: If you owe between $10,000 and $50,000, you can apply for a streamlined installment agreement. This type of agreement does not require a financial statement or a lien.
3. Partial Payment Installment Agreement: If you cannot afford to pay your tax debt in full and you do not qualify for a guaranteed or streamlined installment agreement, you may be able to apply for a partial payment installment agreement. With this type of agreement, you will make smaller monthly payments than with a traditional installment agreement.
4. Non-Streamlined Installment Agreement: If you owe more than $50,000, you will need to apply for a non-streamlined installment agreement. This type of agreement requires a financial statement and may also require a lien.
Benefits of an Installment Agreement
There are several benefits to setting up an installment agreement with the IRS. First, it allows you to pay your tax debt over time, which can be helpful if you cannot afford to pay it all at once. Second, it can help you avoid penalties and interest on your tax debt. Finally, it can help you avoid more serious consequences, such as wage garnishment or levies on your bank accounts or property.
Conclusion
If you owe money to the IRS and cannot afford to pay it all at once, an installment agreement may be a good option for you. There are several types of installment agreements available, depending on the amount of tax debt you owe and your financial situation. To apply for an installment agreement, you can use the IRS Online Payment Agreement tool or fill out and mail in Form 9465. Setting up an installment agreement with the IRS can help you avoid penalties and interest on your tax debt and can help you avoid more serious consequences, such as wage garnishment or levies on your bank accounts or property.