IRS Installment Plans

If you cannot pay your tax debt in full, the IRS may agree to let you pay it off gradually in monthly installments as part of an IRS installment plan.

The IRS may be a difficult and impersonal entity to work with, but it is also highly logical and practical. The agency understands that it simply cannot take money that doesn’t exist. By allowing taxpayers to pay down a debt over time as a form of tax resolution, this can often be the easiest and best way for the agency to collect all the money it is owed. And, since the IRS collects interest on past due amounts, it does not actually burden the agency financially to allow someone to pay back taxes gradually in installments.

IRS installment plans are often very viable options that work well for both the IRS and the taxpayer. Though you will usually have to pay penalties and interest, learning how to set up an IRS payment plan through successful tax negotiation can get you back on a track, eventually becoming free of your tax debt.

What is an IRS Installment Plan?

An IRS installment agreement can be either formal or informal. In an informal installment agreement, the taxpayer promises to make monthly payments in an agreed amount which will pay off his balance within two years. A formal installment agreement is a written agreement in which the taxpayer promises to make, and IRS agrees to accept, monthly payments in a specified amount. A taxpayer can allocate payments, such as against the trust fund portion of employment taxes, under an informal installment agreement but not under a formal installment agreement.

What is the minimum monthly payment for an IRS tax installment plan?

Your minimum payment will be the balance due divided by 72 for balances that are between $10,000 and $25,000. IRS collection personnel are generally reasonable people. If an IRS collection employee sets a taxpayer’s installment payment at an amount that the taxpayer’s representative believes is too high, the representative can speak with the collection employee’s manager. If the representative is unable to resolve the amount of the employee’s installment payment by talking with the collection employee’s manager, he can appeal the matter to the IRS appeals office.

What are the benefits of an IRS installment plan?

1. Avoid further penalties

If you don’t communicate with the IRS, they can take further action against you, including wage garnishment. Setting up an installment plan in good faith will keep you on good terms.

2. Improve your credit

If your credit score took a hit due to unpaid taxes, setting up and sticking with an installment will help improve your numbers and help get them back to where they were prior to your audit.

3. Ensure future tax refunds

In order to make sure you receive federal tax refunds in the future, it’s important to make sure your balance with the IRS is up to date. An installment plan lets you schedule payments so you’re up to date by tax season.

How long does approval for an IRS Payment Plan take?

Generally, it takes 15 to 30 minutes to set up the initial agreement by phone and then approximately four to six weeks to finalize direct debit setup. You can expect the process to take a little longer if you can’t pay by direct debit or payroll deduction.

How long are IRS Payment Plans?

IRS payment plans last six years and can be initiated when you file your taxes. Fill out form 9465, Installment Agreement Request and the IRS will then set up a payment plan for you.

How can Optima Tax Relief help you with IRS Installment Plans?

The IRS allows numerous ways for arranging to pay down tax debt. At Optima Tax Relief, our goal is to set up a payment option that works for you, pays off the tax debt in the shortest amount of time, and will keep the interest accumulation to a minimum.