If you cannot afford to pay your taxes in full you may be able to negotiate a payment plan with the IRS. Creating an installment plan agreement can allow you to avoid the harsh consequences of not paying your taxes on time. Tax attorney Juda Gabaie can review your unique tax situation and help you devise an installment payment strategy that works for you to reduce penalties and get the IRS off your back.
What is an Installment Plan Agreement?
Even the IRS understands that some taxpayers may not be able to pay their tax bills in full by the applicable deadline. In order to encourage payment, the agency permits these taxpayers to create installment plans. These plans allow taxpayers to pay their tax liabilities using multiple payments over a set period of time. Setting up an installment plan can help (most) taxpayers avoid burdensome tax liens and other tax consequences. Taxpayers who choose to pay their taxes through an installment payment plan will still be subject to interest and penalties for late payment.
Types of IRS Installment Plan Agreements
The IRS provides a few different types of payment plans. Some plans offer limited penalties and interest if you pay your taxes within a short period of time. Others allow you to spread out your payments over a longer period, but add in interest, fees, and penalties. The installment agreement that is best for you will depend on:
- How much you owe; and
- How long you need to pay off the debt.
Guaranteed Installment Plan Agreements
The IRS may agree to enter a guaranteed installment plan if you owe less than $10,000 and can afford to pay off the debt within three years. You will be responsible for paying your tax liability, interest, and fees in full by making 36 monthly payments. In order to qualify for a guaranteed plan, you must have filed a return, paid all prior taxes, and not had an installment agreement within the past five years.
Streamlined Installment Plan Agreements
Since penalties and interest will accrue while you make payments, it is in your best interest to satisfy your tax liability as quickly as you can. The IRS may accept a streamlined installment plan if you owe $50,000 or less in taxes, fees, and interest, and can pay your liability in full within 72 months. A taxpayer may be able to avoid a lien by the IRS if immediate action is taken by the taxpayer. The experienced tax attorneys at Gabaie & Associates, LLC can help you create a custom installment agreement that fits your needs and may be able to avoid a lien filing by the IRS.
Non-Streamlined Installment Plan Agreements
Taxpayers who owe more than $50,000 in taxes, fees, and interest have the option of requesting a non-streamlined installment plan. However, these taxpayers must disclose detailed financial information about their income, assets, debts, and living expenses. The agency will review these requests for installment plan agreements on a case-by-case basis. When an installment agreement is created for debt exceeding $50,000, the IRS may file a federal lien. Creating these types of installment plans does not necessarily mean that you will pay your taxes in full. The IRS is still limited to a period of ten years to collect taxes. As a result, the IRS will consider partial payment plans in some situations.
Requesting an Installment Plan Agreement
Are you concerned that you will not be able to pay your tax liability in full by the deadline? You may want to consider requesting an installment agreement with the IRS. While interest and fees will still accrue on your overdue bill, a payment plan can help you to avoid the consequences that accompany non-payment of taxes such as levies, garnishments and further enforcement actions. The experienced tax attorneys at Gabaie & Associates, LLC can help you create a custom installment agreement that fits your needs. Contact us today to request a free consultation and learn more.