Meeting your tax obligations should always be a priority, but there are times when unexpected events can affect your financial capability to pay your taxes. Fortunately, the IRS offers a variety of payment options to help you settle your tax debt, including a payment plan. In this article, we’ll discuss everything you need to know about set up payment plan with irs.
1. Types of IRS Payment Plans:
The IRS offers several payment plans to fit your budget and financial situation. These include:
a) Guaranteed Installment Agreement: This payment plan is available for taxpayers who owe $10,000 or less. To qualify, you must have filed all required tax returns, and the balance must be paid within three years.
b) Streamlined Installment Agreement: This payment plan is available for taxpayers who owe up to $50,000 and can pay the balance within six years. You must also have filed all required tax returns within the last six years.
c) Partial Payment Installment Agreement: This payment plan is available for taxpayers who cannot pay the full balance within the given time frame. This plan requires you to pay a portion of the debt for a set period, which can result in a lower monthly payment.
2. Eligibility:
To qualify for a payment plan, you must have filed all required tax returns and disclosed all assets, including bank accounts, real estate, and investments. Failure to disclose these assets may result in a rejection of your payment plan request.
3. Requesting a Payment Plan:
To set up a payment plan, you may submit an Online Payment Agreement Application, or file Form 9465. This form should be filed along with your tax return, and there is a $120 fee for setting up a standard installment agreement.
4. Consequences of Defaulting:
If you fail to make your payments on time, the IRS can take action against you, such as filing a tax lien or seizing your assets. In some cases, the IRS may even cancel your agreement and demand full payment of your tax debt.
5. Options to Modify or Terminate Your Payment Plan:
If you need to modify or terminate your payment plan, you can contact the IRS to make changes or request a cancellation. Some reasons for modifying a payment plan include a significant change in income or living expenses.
Conclusion:
Setting up a payment plan with IRS can be a practical solution if you are facing financial challenges. However, it is essential to understand the types of payment plans available, the eligibility requirements, and the consequences of defaulting. By fulfilling your tax obligations through a payment plan, you can protect your finances and avoid further penalties and interest.