Unpaid taxes are a nightmare to deal with, but there are certain options the IRS has available that can put you on the road to righting your wrongs with them. One of the most valuable is an IRS installment agreement, which permits taxpayers to pay indebtedness for tax over time rather than all at once. This is meant to lighten the burden on the taxpayer, consequently averting them from more rigorous actions like wage garnishment. In this article, we shall discuss what IRS installment agreements are, their benefits, how to apply for one, and when to get professional help, such as that of experts like Florida tax advisors or a wage garnishment lawyer.
What Is an Installment Agreement with the IRS?
An IRS installment agreement is an agreement by which a taxpayer is granted a fixed period to pay the tax debt. The IRS, instead of requiring the immediate payment of the full amount, allows smaller, more comfortable amounts up until the totality of the debt is paid off. This option proves rather helpful for individuals or businesses who are in debt beyond their immediate capacity to pay.
The IRS offers several types of installment agreements based on the amount owed and financial situation. These plans help you avoid aggressive collection activities, such as wage garnishment or bank levies, which could severely affect your financial stability.
The Benefits of Setting Up an IRS Installment Agreement
Setting up an IRS installment agreement comes along with several benefits:
Manageable Payments:
Probably the most significant advantage of an installment agreement is that it can break down your tax debt into much smaller, manageable payments. This can mean you are not necessarily required to make one big payment for your tax bill; instead, you may actually make payments for several months, or even years, based on the amount owed.
Immediate IRS Collection Actions to Avoid:
Once you’re on an approved installment agreement, the IRS will generally stop more aggressive collection attempts, such as wage garnishment or bank levies. That can be a peace-of-mind factor in and of itself because you won’t be worried that your check is going to be intercepted or that your assets are going to be seized as you are paying your debt off.
Greater Financial Stability:
Having a payment plan relieves you so that you can handle your general financial situation without necessarily having to give up the essentials, like rent, groceries, or utilities, just to pay off your tax debt.
Extra Penalties Avoided:
While interest will still be added, making an installment agreement prevents additional penalties against you for not paying your taxes on time, saving you money in the long run.
How to Apply for an IRS Installment Agreement
The application process for an IRS installment agreement is somewhat straightforward, but it does require some preparation. Here’s how you begin the process:
Assess Your Tax Debt:
You have to know exactly how much you owe. You will find this on the IRS website under your account or in any notices you have received.
File Form 9465:
The most important form for requesting an installment agreement is Form 9465: Installment Agreement Request. This will ask you to provide the amount owed, your proposed monthly payment amount, and some basic financial information.
Online Application:
The IRS allows you to apply for an installment agreement online if you owe less than $50,000 in combined taxes, penalties, and interest. If your debt is over this amount, you will need to submit additional forms or work directly with a tax professional.
Work with a Tax Professional:
While you are free to submit on your own, retaining the services of a Florida tax professional could ease the process a little more smoothly in case of a complicated monetary situation. They can help navigate your application and help take it to completion while boosting your chances of acceptance. Tax professionals also specialize in tax resolution services, which can further help you with your situation.
Types of IRS Installment Agreements
The IRS provides various types of installment agreements depending on the situation with the taxpayer:
Guaranteed Installment Agreement:
If you owe less than $10,000 and have filed all your tax returns on time, then the IRS will guarantee approval for your irs installment agreement request. This option allows you to pay off your debt normally in a period of three years.
Streamlined Installment Agreement:
This is for taxpayers owing up to $50,000. Under this plan, you won’t have to file detailed financial information with the IRS, and you will have, in most instances, six years to pay your debt.
Partial Payment Installment Agreement:
If you owe more than you can pay over time, you may qualify for a partial payment installment agreement. You can make smaller payments over time but may not pay the full amount of your tax debt before the plan ends.
Non-Streamlined Installment Agreement:
If you owe over $50,000, you will have to submit detailed financial statements, which include income and expense verification and your assets. This avenue takes more deliberation in negotiation and should best be addressed with the aid of a Florida tax professional advisor.
The Role of Tax Resolution Services in Setting Up Installment Agreements
The rules and regulations of the IRS are tricky to follow if one does not understand tax laws. This is where tax resolution services come into play. A professional tax resolution service—for example, Florida tax advisors—can negotiate the best possible installment agreement and keep you from costly mistakes.
Here’s how they can help:
Assess Your Financial Situation:
The tax experts will take your financial situation into consideration and come up with the best decision. They will thus be able to advise if the installment agreement is your option or if there is any other avenue to take.
Negotiate on Your Behalf:
Whether setting up a standard payment plan or coming to a more complex solution, such as a partial payment agreement, tax professionals know how to negotiate with the IRS to get good terms.
Handle Documentation:
Getting an installment agreement requires thorough paperwork; hence, tax resolution professionals ensure that all papers are filled and submitted on time.
How to Stay Compliant with IRS Payment Plans
Once the IRS grants you an installment agreement, your compliance with it becomes crucial. Failure to pay agreed-upon payments or failure to remain current with future taxes may trigger cancellation of the IRS agreement and resumption of collection activities.
Timely Payments:
Pay your monthly agreed-upon installment on time. Delinquent payments may just lead to termination by the IRS.
File Future Returns:
You need to file all future tax returns on time and pay any taxes owed in addition to your monthly installment. If you fall behind on new taxes, the IRS could revoke your agreement.
Keep the Lines of Communication Open:
When the change in financial condition does set in, it will be better to communicate with the IRS or your tax advisor and change your payment plan accordingly. It will help you proactively and keep you away from being in default of your agreement.
Alternatives to IRS Installment Agreements
An installment agreement is a great solution for many taxpayers, but it is by no means the only alternative. Some of these options include:
Offer in Compromise:
If you are unable to pay your full tax debt amount, then you may be eligible for an Offer in Compromise. You will be allowed to settle your debt for less than what you owe, but it is more difficult to qualify for than with an installment agreement.
Currently Not Collectible Status:
In cases of the inability to pay anything at all, you may fall into a Currently Not Collectible status. This will suspend collections but will not stop interest from accruing, and the IRS may still check into your case in the future.
Consult a Wage Garnishment Attorney:
If the IRS has already begun to garnish your wages or levy your bank account, then it is time to go see a lawyer who specializes in wage garnishment. They can communicate on your behalf with the IRS to reduce or stop the garnishment and help you find a more feasible solution.
Conclusion
An IRS installment agreement setup is one of the most valuable options for taxpayers who owe an amount greater than they can pay in full at one time. If you have the right plan in place, you can work your way out of debt and avoid some IRS harsh collection activities. You need to understand the types of agreements available, and you need to make sure you stay in compliance from start to finish. If you are uncomfortable handling this yourself, Florida tax advisors or a wage garnishment lawyer may be able to help guide you through the system and obtain the best possible outcome. Utilizing tax resolution services can further ensure your financial situation is handled professionally and with the best outcome.
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