One of the most common methods of paying back taxes, and the one that the IRS tends to prefer above all others, is an IRS installment plan. These payment methods let you chip away at your debt bit by bit with affordable payments and show that you are making efforts to pay the agency what you owe. The reason the IRS prefers this method is because it allows them to continue charging you interest and penalties while you pay, which means that they get more money in the end.
Still, this method can sometimes benefit you as well, but always do your homework to see if you are eligible for other forms of relief as well. In some cases, you may actually be able to get penalties and fees removed, for example, while still making payments on your tax due. You may be able to dispute the IRS assessment or possibly file an amended tax return that takes advantage of deductions and credits you did not realize you were eligible to use.
All of this together is an excellent reason to seek advice and help from the professional tax relief services at Instant Tax Solutions. Our experienced, expert Houston tax debt relief attorneys will review your finances in detail and present all the available options for you. If an installment plan is in the cards, we can represent your interests and ensure that you get a plan that fits your financial needs.
If you are ready to talk about your tax relief options, we are ready to listen. Call us at (888) 921-3781 or reach out to us online for a free, confidential, no-obligation consultation today.
An Overview of Houston IRS Payment Plans
An IRS payment plan is quite simply an agreement with the agency that you will pay your taxes on a schedule of affordable monthly payments. In some cases, depending on the specifics of your agreement, you may have to pay additional user fees. The good news is that when you request a payment plan, the IRS is normally prohibited from applying levies or taking other collection efforts against you while the agreement is pending or accepted.
Some interest and penalties will continue to accrue on your account while you are paying. You may also have to pay user fees to cover the IRS’ costs of processing the agreement. Certain taxpayers who meet specific qualifications may see these user fees waived or be eligible for reimbursement, again under specific circumstances such as occupying a low-income bracket.
The IRS offers many options to set up payment plans, including the ability to make payments online through their online self-service portal. The options available to you will depend on whether you are an individual taxpayer or a business taxpayer, how much you owe in back taxes, and your current total income and assets. The online portal will allow you to keep track of where you are, your current balance, and other important information.
The online payment portal also allows you to administer your account. Through it, you can:
- Change your payment due date
- Change your monthly payment
- Change to a direct debit payment method
- Change your bank account information
- Reinstate your payment plan if you accidentally default
Some of these options will depend upon your current status at the time. Reinstating your defaulted payment plan, for example, may require additional steps to negotiate with the IRS before they permit the action to occur. In this case, you may also have to pay a reinstatement fee.
It is, of course, always best to avoid defaulting on your payment plan. Always pay your monthly amount by the due date, continue to file your required tax returns on time, and do not fall behind on current or future taxes. If you pay by check, always be sure to include the full information on your check, including name, address, phone number, tax year, return type, and Social Security number. Contact the IRS immediately if there is any change in your situation whether moving, income, or another issue that arises.
Options for IRS Installment Agreements
Your options to enter an IRS installment plan depend on your tax status, amount owed, and total assets. Your tax debt must not exceed a certain threshold. For individuals, this threshold is $50,000 for long-term payment plans or $100,000 for short-term plans.
For businesses, the threshold is $25,000 for a long-term plan. The IRS does not list a threshold for short-term payment plans for business owners. If you owe taxes equal to or less than this threshold, you may be eligible for a payment plan.
Long-Term Payment Plans
Long-term payment plans allow you to pay off your taxes over the next 72 months, or six years. You will continue to accrue penalties and interest while you pay down the amount, much like paying a loan or credit card debt. This means you will have a proposed payment amount that is high enough to cover these fees and interest as well as reduce the principal accordingly. The IRS refers to long-term payment plans as “installment agreements.”
These types of payment plan require that you pay a setup fee. The specific amount depends on your circumstances, as follows:
- Non-direct-debit, applying over the phone, in person, or by mail: $225
- Non-direct debit, applying online: $130
- Non-direct debit, low income: $43
- Direct debit, applying over the phone, in person, or by mail: $107
- Direct debit, applying online: $31
- Direct debit, low income: $0
Long-term payment plans are often the most affordable way that someone can manage their tax debt.
Short-Term Payment Plans
Short-term payment plans are essentially just a brief extension for paying off what you owe. These give you either 90 or 180 days to pay your past tax debt in full. It is for filers who will be able to pay their back tax burden but just need some time to get their finances together.
Taxes paid in this way are still considered past due, but you will pay fewer penalties and interest by paying the amount owed faster. The IRS may also be more lenient when it comes to releasing liens, account freezes, levies, or other collection efforts when you agree to a short-term payment plan.
Short-term payment plans carry no application fee, and are more likely to be accepted than long-term payment plans. In the end, the IRS just wants their money, and are generally willing to abstain from collections if they are confident you will pay them what is due. Suspension of these collection efforts is by no means guaranteed, but you may have a better shot with a short-term plan than with a long-term one.
Still, before applying for a short-term payment plan, be sure that you can actually make the payments. If you are not sure which plan is best for you, Instant Tax Solutions can help you make the right choice and create a financial plan to help you stay on solid footing for the future.
Changing Payment Plans
After the IRS approves your payment plan, you can propose alterations at any time. As mentioned above, the online payment portal lets you adjust your payment amount, due date, elect to shift from check to direct debit, change bank accounts, and other administrative changes. The IRS tries to be as flexible as possible to ensure you can make your payments.
How to Set up a Houston IRS Settlement Agreement
Applying for a payment plan through the IRS requires simply that you complete the agency’s online payment agreement application. This application will walk you through the process of qualifying, gathering the documents and information you need, and paying the appropriate fees. If you think that you qualify for low-income fee waivers, you will need to complete Form 13844: Application for Reduced User Fee for Installment Agreements.
Your application online will be approved or rejected immediately. If it is rejected, you can try again by submitting Form 9465. In this case, your approval will be pending for 30 days, but this can provide some relief, as the IRS cannot take collections actions while the application is pending.
If you cannot apply or pay online, you will complete Form 6465: Installment Agreement Request, and attach Form 433F: Collection Information Statement, which you can mail to the IRS. You can also apply over the phone. Remember, applying online or over the phone carries significantly higher fees. Again, while the IRS reviews your application and it is pending, they should suspend any and all collections activities.
If you cannot make any payments at all, you may be eligible to request suspension of collection through a Currently not Collectible claim. You must, however, prove that your finances are low enough that you cannot pay. This can buy you a bit of extra time to set up your ability to make payments.
If you are not certain what to do, Instant Tax Solutions is here to guide you through the process.
Contact Instant Tax Solutions for IRS Tax Relief Today
If you owe back taxes, it can seem devastating. Remember, however, there are options for relief available. It just depends on your ability to prove your circumstances, show what you can pay, and work with the IRS to make it happen.
Working with the IRS can be tricky sometimes, as they are eager to get their money. When you work with Instant Tax Solutions, we can help negotiate with the agency and seek many forms of tax relief for you, including installment plans and fee or penalty waivers. Get out from under your crippling tax debt. Call us at (888) 921-3781 or use our online form to schedule a free case review today.
