Although acceptance is not guaranteed, the IRS usually doesn't require additional financial information to approve these plans. With a simplified plan, you have 72 months to pay. A minimum payment applies, equal to the balance due divided by the maximum period of 72 months. The IRS will analyze your full financial situation to determine your ability to pay.
The IRS will calculate your monthly payment based on your allowable income and expenses. And you must be able to pay your full tax balance before the due date of the collection law. The minimum payment is equal to your debt, divided by seventy-two (the number of months in six years). Again, you have to pay interest, so larger payments can help you save money.
The IRS understands that not everyone can pay their taxes quickly and one of their main concerns is to collect the taxes due. To avoid a garnishment, it's important to set up your agreement before the IRS officially begins collecting your balance. These plans are flexible and can help you avoid costly penalties for not paying or filing your taxes. If the IRS computers show that you haven't filed all of your overdue tax returns, you won't be able to apply for an AI.
Remember that you still have to pay interest on your tax debt, so it makes sense to make larger monthly payments to reduce the interest you'll have to pay. You only need to pay penalties related to underpayment or late payment, if applicable, and interest. Get information from H&R Block about the four types of IRS penalty relief and which IRS penalty relief option may be best for your situation. For more information on how to deal with the IRS to come up with a payment plan, see Stand Up to the IRS, by Frederick W.
File all required tax returns on time and pay all taxes in full and on time (contact the IRS to change your current agreement if you can't). You can also outsource the work to a tax professional, who can analyze your situation to determine the right option and even request the installment payment agreement from the IRS on your behalf.
IRS installment paymentplans don't affect your credit and the IRS doesn't report them to any of the credit bureaus. Confirm the payment information, date and amount by reviewing your recent statement or the confirmation letter you received.
If the new amount of your monthly payment doesn't meet the requirements, you'll be asked to modify the payment amount. Pay electronically online or by phone using the Electronic Federal Tax Payment System (EFTPS) (registration required). When you apply for a payment plan (installment agreement), with certain exceptions, the IRS is generally prohibited from collecting taxes and the IRS collection period is suspended or extended while an installment payment agreement (IA) is pending. A payment plan can help you settle your tax debt and avoid processing and potential penalties for not paying your taxes.