If you cannot pay your IRS tax debt in full, an installment agreement may let you make monthly payments over time instead of paying the entire balance at once. The IRS offers several payment plan options, and the right one depends on how much you owe, your ability to pay, and your tax compliance history.
For taxpayers in Frederick, an IRS installment plan can provide a way to address a tax balance while avoiding the pressure of paying the full amount immediately. However, interest and penalties generally continue to accrue until the balance is paid.
Gabaie & Associates, LLC helps individuals and businesses in Frederick evaluate IRS payment options and address federal tax debt.
Need help with an IRS payment plan? Call (410) 358-1500 or contact Gabaie & Associates online to discuss your situation.
What Is an IRS Installment Agreement?
An IRS installment agreement is a payment plan that allows a taxpayer to pay a federal tax debt through periodic payments rather than paying the entire balance immediately. The IRS now generally refers to these arrangements as payment plans, although “installment agreement” remains widely used.
The IRS offers different types of payment plans. Some taxpayers may qualify for a relatively simple monthly arrangement based primarily on the amount they owe. Others may need to provide more detailed financial information before the IRS will approve a plan.
A payment plan does not erase the tax debt. Interest and applicable penalties generally continue to accrue until the balance is paid in full.
Can Frederick Taxpayers Qualify for an IRS Payment Plan?
Eligibility depends on your individual circumstances. For many individual taxpayers, the IRS allows an online application for a long-term payment plan when the combined balance of tax, penalties, and interest is $50,000 or less, provided required tax returns have been filed.
The IRS also offers a short-term payment plan for some taxpayers who owe less than $100,000 and can pay the balance within 180 days. There is generally no setup fee for a short-term plan, although interest and applicable penalties continue to accrue.
For businesses, the rules can be different. Business taxpayers generally cannot establish payment plans through the same online process available to individuals and may need to contact the IRS directly. Certain business taxpayers can qualify for Simple Payment Plans based on the amount and type of tax debt involved.
What does the IRS consider?
Depending on the type of installment agreement, the IRS may consider:
- Your total tax balance
- Your income
- Your monthly living expenses
- Your available assets
- Whether you have filed required returns
- Whether you are current on required tax payments
- Your ability to make the proposed monthly payment
If you cannot meet the requirements for a simpler payment plan, the IRS may require additional financial information before deciding how much you should pay each month.
What Types of IRS Payment Plans Are Available?
There is no single installment agreement that works for every taxpayer. The IRS offers several arrangements, including short-term and long-term payment plans.
- Short-term payment plan: Generally allows eligible taxpayers to pay the full balance within 180 days. There is no setup fee, but interest and applicable penalties continue.
- Long-term payment plan: Allows eligible taxpayers to make monthly payments over a longer period. The IRS says most taxpayers have up to the applicable collection period to pay their balance, which is generally 10 years from the date the tax was assessed.
- Guaranteed installment agreement: Certain individual taxpayers with smaller tax debts may qualify for an agreement without the IRS requiring the same level of financial review. Specific eligibility requirements apply.
- Other payment arrangements: Taxpayers who do not qualify for the simpler options may still have other ways to address their debt. The IRS may require a Collection Information Statement and a closer review of the taxpayer’s finances.
How Do You Apply for an IRS Installment Agreement?
Many individual taxpayers can apply for an IRS payment plan online through an IRS Online Account. If you are not eligible to apply online, you may be able to submit Form 9465, Installment Agreement Request, or contact the IRS by phone. Depending on your circumstances, the IRS may also request additional financial information.
Before applying, make sure you have filed all required tax returns. An installment agreement generally does not excuse you from filing future returns or paying future taxes on time.
Before applying, consider whether a payment plan addresses the full scope of your tax problem, including any existing IRS collection action or newly assessed tax debt.
How Much Does an IRS Installment Agreement Cost?
The IRS charges a setup fee for many long-term payment plans. The amount depends on the type of plan, how you apply, and how you make your payments. Qualified low-income taxpayers may receive a reduced fee or have certain fees waived or reimbursed.
For example, the IRS currently lists different fees for long-term plans paid by direct debit versus other payment methods. A short-term payment plan of 180 days or less has no setup fee.
The setup fee is only one part of the cost. Interest and applicable penalties generally continue to accrue until the tax debt is paid in full.
What Happens If You Miss an IRS Installment Payment?
Missing a payment can put an installment agreement at risk. The IRS advises taxpayers to make at least the minimum monthly payment when it is due and to remain current with future tax filing and payment requirements.
If an agreement defaults, the IRS may charge a reinstatement fee and can ultimately terminate the plan. If the agreement is terminated, the IRS may resume collection actions, including filing a federal tax lien or issuing a levy against wages, bank accounts, or other property.
If you know you cannot make your scheduled payment, do not simply stop paying. Contact the IRS or a tax professional to determine whether the agreement can be modified or another resolution option is available.
Can an IRS Payment Plan Stop a Levy?
An installment agreement can affect IRS collection activity, but it does not automatically prevent every levy or other collection action.
If you have already received an IRS notice warning that a levy is coming, applying for a payment plan may not be enough. You may have additional collection options or appeal rights depending on the action the IRS has taken.
If you are dealing with an IRS bank levy or wage garnishment in Frederick, addressing that collection action may need to happen alongside your payment-plan request.
Can the IRS Reject or Terminate an Installment Agreement?
Yes. The IRS can reject a proposed agreement or terminate an existing one when the taxpayer does not meet the requirements or fails to comply with its terms.
For example, an agreement can be placed in default if you do not make required payments or fail to stay current with future tax obligations. The IRS may also terminate an agreement if you provide materially incomplete or inaccurate financial information when required.
If the IRS rejects or terminates your agreement, you may have appeal rights. The Collection Appeals Program (CAP) can cover certain installment agreement rejections, modifications, and terminations.
Is an Installment Agreement the Best Way to Resolve Your Tax Debt?
Not necessarily. A monthly payment plan can make sense when you can eventually pay the balance but cannot afford to do so immediately. But it may not be the best option if your financial circumstances make full repayment unrealistic.
Depending on your situation, you may want to consider an Offer in Compromise, temporary collection delay, penalty relief, or another tax resolution strategy.
Essentially, the goal should be to find a solution that addresses the tax debt without creating another financial problem.
How Can a Frederick Tax Attorney Help With an IRS Payment Plan?
An IRS installment agreement can seem straightforward, but the details matter when you owe a significant balance or are already dealing with collection activity.
Gabaie & Associates, LLC can review your IRS balance, financial circumstances, and collection status to determine which payment options may be available. If an installment agreement is appropriate, an attorney can help you understand the requirements and prepare the information needed to support your request.
If a payment plan is not the right fit, the same review may identify another option, such as an Offer in Compromise or a different collection solution.
Frequently Asked Questions
Can I get an IRS installment agreement if I owe more than $50,000?
The IRS offers different payment arrangements depending on the taxpayer and circumstances. If you exceed the limits for a simpler online payment plan, you may still qualify for another type of installment agreement, but the IRS may require additional financial information.
How long do I have to pay an IRS installment agreement?
Many taxpayers have up to the applicable collection period to pay their federal tax debt. The IRS generally uses a 10-year collection period, although certain events can extend or suspend that period.
Can a Frederick tax attorney help me if the IRS already rejected my payment plan?
Yes. If the IRS rejects an installment agreement, you may have appeal rights or may qualify for a different payment arrangement. The appropriate next step depends on why the IRS rejected the request and your current financial situation.
Talk to a Frederick, MD IRS Installment Agreement Attorney
You do not necessarily have to pay a federal tax balance all at once. An IRS installment agreement may give you time to pay what you owe while reducing the risk of more aggressive collection action. However, the plan needs to fit your circumstances, and you must continue meeting your tax obligations.
If you are in Frederick and struggling with an IRS balance, Gabaie & Associates, LLC can help you evaluate your options. Call (410) 358-1500 or contact the firm online to discuss your tax debt.
