How to Negotiate a Payment Installment Agreement with the IRS

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Owing taxes to the IRS often leads to fines, penalties, and, in some cases, financial audits. It may also affect your credit score and damage your business reputation. Fortunately, the IRS provides various programs to help taxpayers repay what they owe. One popular and convenient tax relief program with negotiable terms is an installment agreement. Applying and qualifying for this plan is an effective way to avoid debt accumulation and clear the entire amount over some time. When applying for tax relief, it is crucial to determine how to negotiate with the IRS. Here, we discuss the installment agreement options available and their requirements. We will also explain how to confirm if you qualify and mention the methods you can use to boost the chances of qualifying.

Installment Agreements You Can Negotiate With the IRS

The IRS provides several installment payment agreements for different categories of debt. Each of these has specific aspects that you must meet to qualify. The first and most common one is guaranteed installment, available to those who owe income tax equal to or less than $10,000. Another option is the streamlined agreement used to clear debts of up to $50,000. If you qualify for this category, you have to repay back taxes in 72 months. The IRS also provides a partial payment installment agreement for those who cannot afford the minimum repayment amounts for the other packages.

Negotiating Payment Installment Agreements With the IRS

Before contacting the IRS, you should first understand the requirements for each installment agreement plan. This way, you can prepare the needed documents and set up costs for negotiation. To qualify for guaranteed installment, you must not have any tax debt for the last five years. Besides, you should prove that you cannot pay the entire amount at once. If the IRS accepts your application, you will have a maximum of three years to clear the debt. Moreover, they will require a setup fee of $31 when you make a direct debit agreement through OPA(Online Payment Agreements). You must also pay an additional $149 for OPA. If you don't use this tool for the application, the fees will increase to $107 and $225, respectively. When applying for a partial installment agreement, you should be able to prove that you cannot pay the debt in full. Further, you need to clear any past tax or fine and ascertain you are not bankrupt. The IRS will require fees similar to those charged for the guaranteed installment option to set up this plan. If you are interested in the streamlined installment agreement, you must have a total tax debt, including penalties of less than $50,000. Unlike in other relief programs, the IRS does not require you to provide any verification of your assets during the negotiation process. You will pay $105 to create a new agreement and $45 to reinstate an existing one when setting up this plan. But, if you use a direct debit agreement, the IRS will charge you $52.

Tips for Negotiating a Payment Installment Agreement

Understanding how to apply and negotiate for tax relief can increase the chances of qualifying. If you have an online payment agreement, use it to set an installment payment plan. Alternatively, apply by mail by printing out form 9465 and filling in all the needed details. In the application, mention how much you can repay each month. However, ensure that the amount you state will allow you to clear the balance within the provided period. Other items to include are:
  • Payment date
  • Any needed documents
  • A cheque for your set up fee
Since selecting the right payment installment plan and negotiating with the IRS may be challenging, it is advisable to contact a tax liability expert. This will guide you in the entire process and help you pick the most convenient plan for you.

Contact Tax Industry to Negotiate an Installment Agreement

Getting professional help when negotiating for debt relief with the IRS can increase the chances of qualifying. At Tax Industry, we offer reliable tax resolution services. Our experts can help you work out the right installment agreement plan to avoid debt accumulation and penalties. Reach out to us today to schedule a consultation.

IRS Payment Plans Pros and Cons

IRS Payment Plans

Failing to pay back taxes can result in IRS audits, interests and penalties on back taxes, IRS wage garnishments and many more tax debt issues. But, the good news is that you have different options for dealing with your back taxes and tax debt, one of which is the IRS Payment plans. If you are unable to pay the owed tax amount, you have the option to apply for the IRS payment plan. A reputable tax relief company can help you setup IRS payment plans.


IRS payment plan is an agreement between the IRS and the taxpayers that allows you to pay the federal tax bill in monthly payments over a certain period of time. But, is it the right option for you? To determine this, you need to know about the Pros and Cons of IRS payment plans:


Pros of Signing Up for IRS Payment Plans


If you are going through financial hardships, you need to be honest with the IRS. You don’t have to panic. Pay what you can, file the returns by the deadline, and contact the federal agency for discussing the IRS payment plan. Here are the benefits of this route:


1. You might get an extension


If you don’t owe a lot of amounts and are sure that you can pay the taxes soon, the IRS can offer you a short-term extension. With this extension, you won’t have to worry about paying your taxes by the April deadline. Also, you will be able to avoid interest and some penalties. This way, you won’t have to take out a loan or put your taxes on a credit card. You will have enough time for paying back the owed amount.


2. The penalties might be waived


In some cases, the IRS might agree to waive the failure-to-pay penalties. However, the interest charges will remain as it is. You can still save a lot of money on the tax bill by getting rid of the penalties.


3. You will know exactly what you owe while setting up an IRS payment plan


When you are in an IRS payment plan, the IRS will tell you exactly what you owe and when it is due. If you sign up for direct debit, making the payments will be very easy. What you need to do is make the right budget. This way paying back the debt doesn’t put you in a financial crisis.


4. You might get an Offer in Compromise


If you are not able to pay your taxes because you have a low income, the IRS might offer you an offer in compromise to forgive your debt. This is a tax resolution option that allows you to pay less than what you owe. However, this option is available only to the people who are facing genuine financial hardship. When you apply for an offer in compromise, the IRS checks your expenses, income, ability to pay, assets, etc. You have to make a reasonable offer which is equal to or more than what the IRS expects to get back over a certain period of time. Only then, the IRS will agree to it.


However, before you apply for the OIC, you have to try an IRS payment plan first. To check if you are eligible, you can check the Offer in Compromise Pre-qualifier tool provided by the IRS. You will have to submit a non-refundable fee of $186. After that, you will have the option to either make periodic payments or make a lump sum payment. Taxpayers who meet the guidelines of the low-income certification don’t have to pay the initial payment of the application fee. While the IRS is evaluating the offer, you don’t have to pay the monthly payments anymore.



Cons of IRS Payment Plans


There are several cons of the IRS payment plans as well.


1. Back taxes Interest and penalties 


Even with the IRS payment plan, the additional penalties and interest will be applied for each month until you pay off the complete debt. This means that ultimately, you will end up paying more than the actual owed amount by the time you finish making your monthly payments.


2. The IRS might still file a tax lien against you


If the IRS has a tax lien against you and you are not able to pay back your taxes, it gives them the right of seizing your property. The IRS will serve you a notice of lien. The notice will state that if you don't make immediate payments, the IRS will seize your assets. If even after receiving the notice of lien, you are not able to pay, then your assets like your house, vehicles, etc. can be sold for satisfying the debt.

3. Paying the sign-up fees


Until and unless you can pay your tax debt in less than 120 days, there is a fee associated with signing up for the IRS payment plan. The fee amount varies for taxpayers depending on their income. For low-income applicants, it costs $43 while for regular applicants of the IRS payment plan might have to pay as much as $225.


As you can see, the worst con of having an IRS payment plan is the interest and penalties that are accrued to the owed amount. So, the most significant disadvantage of having an IRS payment plan is that they are expensive. Also, if you miss a payment, it can damage your credit. Lastly, to apply for an IRS payment plan, you must have filed all the past year’s returns.


Clearly, the pros of the IRS payment plan far outweigh the cons. It makes paying off the debt more manageable. You won’t have to pay off the whole tax debt at once and avoid any collection actions from the IRS. Whether you are an individual taxpayer or a business owner who can’t pay off their debt, signing up for an IRS payment plan is the best option for you.


So, if you are one of the millions of Americans who can’t pay their tax bill, don’t panic. And definitely don’t hide. Be upfront about your situation instead of ignoring it and hoping it goes away. The IRS payment plan is the best option for people who are behind on the current year’s taxes and can't pay it within the deadline. However, you shouldn’t rely completely on this. The best pathway for you is to hire a tax resolution service. They have tax experts who can determine the best strategy for you.


Frequently Asked Questions About IRS PAYMENTS


Once your Installment Agreement Request is accepted, the IRS will set up a payment plan, which can last up to six years. 

If you have a financial hardship and have fallen behind on your taxes, you can request full payment, a short payment plan (120 days or less), or a long term payment plan (more than 120 days). 

Yes. The IRS can refuse a payment plan if a taxpayer provides false/inaccurate information, offers a bad deal, underreports income, or makes mathematical mistakes. 

You may qualify for a long-term payment plan if you owe $50,000 or less in back taxes (including penalties and interest) and have been filing returns regularly. A taxpayer who owes less than $100,000 in combined tax, penalties, and interest may qualify for a short-term payment plan. 

If you enter into an installment agreement with the IRS and cannot pay in the future tax year, you can add the new balance to your existing agreement. 

There is no limit to the number of times you can enter into a payment plan with the IRS.