An IRS installment plan is an agreement to pay your tax debt back over time in monthly payments. When you owe a tax debt to the IRS, they have a number of ways of collecting from you, including levying your bank account or wages, seizing your state tax refund, or seizing your home and selling it at an auction. An installment agreement is one strategy that can be used to halt these collection activities.
Before you consider negotiating an installment plan, you should be aware that there are other options that may be able to reduce your tax debt. If you are unable to pay back your tax debt, you may qualify for an Offer in Compromise. You may also consider using a tax bankruptcy, obtaining innocent spouse relief, or disputing the amounts you owe to the IRS.
All of these strategies can be used to effectively wipe out some or all of your tax debt, and they can also be combined with installment agreements in some cases. Consult with a tax attorney before you commit to a monthly payment plan with the IRS.
How to File for an Installment Plan
If you owe under $50,000 in tax debt, you can file for an installment plan online. For taxpayers that owe over $50,000 you will need to mail in forms 9465 and 433-F to apply for an installment plan. The IRS will examine your assets, liabilities, and income to determine the monthly amount that they believe you should pay. The threshold for an online business installment agreement is $25,000.
Installment agreements are up to the discretion of the IRS, so different IRS employees may give you different opinions on what you should pay. Be sure that the monthly payment is an amount you can live with, because you will have to pay it every month until you have paid off your tax debt in full. You may need aggressive negotiation to get the best installment plan available.
There are other requirements you must fulfill for an installment plan. Any future tax refunds you have will be taken by the IRS and applied towards you debt. You must file all tax returns on time and pay all taxes on time. If you can no longer make your monthly payments, contact the IRS to attempt to renegotiate your existing agreement.
An installment plan can be a good option for taxpayers that have the ability to pay off their debt, but need more time to pay it off. If you are not sure what the best strategy is for handling your tax debt, consult with a tax lawyer.