More Time to Pay with an IRS Installment Agreement
No one likes the idea of owing the IRS money, particularly if it’s past due. Notices of an unpaid liability can be stress-inducing, to say the least. First, you might not have the funds to simply write a check. And you’re most certainly concerned about what the IRS is going to do if you don’t pay up. Fortunately, you might not have to pay all at once.
Whatever circumstances led to your tax debt – by definition, a tax liability that is past due – handling it early on is definitely in your best interest. But you can resolve your debt a few different ways. Maybe one of the most convenient payment methods for wayward taxpayers is the IRS Installment Agreement (IA). If you qualify, it can save you a considerable amount of stress.
An Installment Agreement is a repayment agreement to satisfy your tax debt over months or years. You may think of this like a credit card payment, which enables you to pay a minimum amount rather than covering the entire balance all at once. The terms of the IA are largely based on how much is due, your tax history and your financial ability.
Typically, if you owe $50,000 or less, qualifying for an Installment Agreement isn’t too difficult. While it’s always a good idea to pay as much as you can up front (more on this in a moment), an IA can allow you to incorporate your tax debt into your monthly rotation of bills. There are a few things to consider, however, before committing to any payment agreement.
Caveats and Kinks
The first thing to understand with an Installment Agreement is that while you are paying back what you owe, you’re still held liable for penalties and interest. In fact, part of what you pay each month goes toward these additional fees. You’re responsible for these extra charges for every month that passes without the balance being satisfied in full. As such, it pays to knock out your debt as quickly as you can.
When you’re attempting an Installment Agreement, you also want to pay close attention to the terms. If you’re dealing with the IRS directly, you may be asked to provide a detailed list of your assets and expenses so they can determine what your monthly payment will be. However, this may not be an actual requirement in order to get an Installment Agreement approved (understanding these details may be easier with the assistance of a tax professional). This is significant because revealing a complete personal financial analysis may not be ideal if you’re attempting to get the lowest payment possible.
Finally, once you qualify for an Installment Agreement, it’s important not to default. How does this happen? If you miss a payment, the IRS can revoke the IA and you’ll be forced to start over. Similarly, if you incur a new tax debt while the Installment Agreement is in place, your payment arrangement can be cancelled. Given these important considerations, you may not want to seek an IA on your own.
Regardless of the type of Installment Agreement you’re trying to obtain, you may wish to first consult with a licensed tax professional. Someone versed in the requirements of a standard (or even non-standard) payment plan can help you avoid unnecessary financial exposure or – worse – choosing the wrong plan. This is critical when you’re attempting to resolve your tax debt in a timely and legal fashion.
You can schedule a no-cost consultation with a tax resolution company, one that specializes in a variety of IRS debt solutions. This way, you can be sure that you’re moving in the right direction; or confirm whether you shouldn’t be moving alone. An Installment Agreement can be a desirable and affordable way to satisfy your tax balance, as long as it’s flawlessly executed.