What Is Installment Agreement?
Under the IRS Fresh Start Initiative, an Installment Agreement is one of the resolution options offered to taxpayers. This arrangement is negotiated between the IRS and the taxpayer who cannot pay their entire tax liability in a single payment.
Operating like a payment plan, an Installment Agreement allows the taxpayer to make monthly payments towards their unpaid taxes until the debt is completely settled.
Is an Installment Agreement Suitable for Your Situation?
If your tax debt is manageable and can be fully paid off within six years through monthly installments, an Installment Agreement could be a suitable option.
As long as you consistently make payments on time, the IRS will not pursue aggressive collection actions such as levies and liens. Furthermore, you will no longer accrue penalties for failure to pay or receive collection letters, demonstrating your dedication to resolving the debt.
However, it’s essential to recognize that interest will continue to accrue on your total debt, leading to paying more than the original amount over time.
What are the Qualifications for an Installment Agreement?
To qualify for an Installment Agreement, it’s essential to be compliant with the IRS.
IRS compliance is determined by your current tax filing status. If you have outstanding tax returns that haven’t been filed, you are considered non-compliant with the IRS, which disqualifies you from eligibility for an Installment Agreement or any other relief program under the IRS Fresh Start Initiative. Once you are compliant, you can proceed by submitting IRS Form 9465 to request an Installment Agreement.
Can I Qualify On My Own?
Absolutely, you can qualify for an Installment Agreement without professional representation. However, depending on your tax balance and financial situation, seeking professional assistance could be advantageous.
Installment Agreements are often the simplest option as they set up a regular monthly payment to the IRS. The IRS calculates this payment plan based on an evaluation of the taxpayer’s financial details.
Several factors affect how this amount is determined, including the maximum allowable expenses for your location. It’s crucial to recognize that these maximum allowable expenses might not align with your actual expenses, prompting taxpayers to acknowledge financial limitations that may not be sustainable over the long term.
Are There Risks When Applying For An Installment Agreement On My Own?
Proceeding without professional representation can lead to the IRS establishing a payment plan that may not be optimal for your financial situation. This plan could extend over a longer period or require monthly payments that exceed your ability to pay, increasing the risk of default.
Installment Agreements often include terms stating that failure to meet payments voids the agreement. In such instances, the IRS may initiate immediate collection actions such as wage garnishments, levies, or liens.
As mentioned earlier, the IRS typically prefers placing delinquent taxpayers into Installment Agreements. Unlike several other programs within the Fresh Start Initiative, an Installment Agreement allows the IRS to maximize collections from taxpayers.
Nevertheless, an installment agreement remains a viable option for obtaining relief under the Fresh Start Initiative, although some taxpayers might qualify for more advantageous relief programs.
Ready to resolve your tax issue?
In just a few minutes you’ll be matched with a real professional with a proven track record.