| IRS encourages taxpayers
to pay what they owe as quickly as possible. For those individuals
or businesses not able to resolve a tax debt immediately, an
installment agreement can be a reasonable payment option.
Installment agreements allow for the full payment of the tax debt
in smaller, more manageable amounts.
To be eligible for an installment agreement,
all returns that are due must first be filed.
Installment agreements generally require equal
monthly payments. The amount of an installment payment will be
based on the amount owed and on the taxpayer’s ability to pay that
amount within the time legally available for the IRS to collect.
By law, the IRS has the authority to collect outstanding federal
taxes for ten years from the date of assessment. For taxpayers
that enter into an installment agreement, the IRS may require a
signed waiver to extend the time IRS can collect.
Taxpayers who already have an installment
agreement from a previous amount owed may still find help. All of
the amounts owed could be included in one installment agreement.
Additionally, a Collection Information Statement may have to be
completed to further illustrate their financial situation.
These forms of payment help to reduce the
burden of mailing the payments, save postage, help ensure timely
payments, and decrease the likelihood that the agreement will
default. If the agreement defaults, enforced collection action
could be taken.
Installment agreement payments can also be made
by electronic funds transfer (www.eftps.gov),
credit card (www.officialpayments.com
or
www.pay1040.com), personal or business check, money order,
cashier’s check, certified funds or cash (cash payments can only
be made in person at a local IRS Office-do not send cash through
the mail).
Fees to Set-up an Installment Agreement
The IRS charges a user fee of $43 to set up the
installment agreement. It is possible for an installment agreement
to be reinstated if the agreement defaults. Also, installment
agreements may be restructured to include additional amounts owed
in one agreement. Reinstating or restructuring an existing
installment agreement will cost an additional $24 user fee.
How to Set-up an Installment Agreement
Taxpayers wishing to pay off a tax debt through
an installment agreement, and owe:
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$25,000 or less in tax, can call the number
on the bill or notice (have the bill or notice available,
along with the social security number), or use the IRS
interactive installment agreement process to apply. A
fill-in Request for Installment Agreement,
Form 9465, is available online
that can be mailed to the address on the bill.
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A notification is sent to the taxpayer advising
whether the terms of the installment agreement have been accepted
or if they need to be modified.
The IRS generally may still file a
Notice of Federal Tax Lien to secure the
government’s interest in the taxpayer's personal or real property
until final payment is made. The notice filing could have a
negative impact on the taxpayer’s credit rating.
Enforced Collection Actions
Generally, IRS enforced
collection actions (i.e., levy against personal or real
property) are not made while an installment agreement request is
being considered, or:
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While an agreement is in effect,
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For 30 days after a request for an
agreement has been rejected, and
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For any period while a timely appeal of the
rejection or termination is being evaluated by the IRS.
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Payments Should be Made Timely
Throughout the term of an installment
agreement, payments must be made on time. If payments cannot be
made due to a change in financial condition, taxpayers should
contact the IRS immediately. Failure to make timely payments could
default the agreement. A defaulted installment agreement could
subject a taxpayer’s account to enforced collection action and
potentially have a negative effect on a taxpayer’s credit
standing.
Annual Statements of Balance Due
In accordance with the law, installment
agreement taxpayers receive an annual statement from the IRS. The
statement provides the amount owed at the beginning of the
statement period, the payments (credits) posted to account(s), any
fees or assessments, and the ending balance. Currently, the annual
statement is sent each year in July. |
