If you`re having difficulty paying your taxes in full, you may be considering setting up an installment agreement with the Internal Revenue Service (IRS). But what exactly is an installment agreement, and how can it help you? In this article, we`ll explain everything you need to know about installment agreements.
First, let`s define what an installment agreement is. An installment agreement is a payment plan that allows taxpayers to pay their tax debt over time rather than in one lump sum. It`s a way to make paying your taxes more manageable, especially if you don`t have the funds to pay your entire tax bill at once.
There are different types of installment agreements available, depending on your specific circumstances. The most common type of installment agreement is the Guaranteed Installment Agreement, which is available to taxpayers who owe $10,000 or less and can pay off their debt within three years. If you owe more than $10,000, you may be eligible for a Streamlined Installment Agreement, which allows you to pay off your debt over a period of up to six years.
To apply for an installment agreement, you`ll need to complete an application form and provide information about your income, expenses, and assets. You can apply online, by phone, or by mail. Once the IRS receives your application, they will review it and let you know if you qualify for an installment agreement.
Keep in mind that there are fees associated with setting up an installment agreement. The fee for a Guaranteed Installment Agreement is $31, while the fee for a Streamlined Installment Agreement is $225. In addition, interest and penalties will continue to accrue on your unpaid tax debt until it`s paid in full.
One important thing to note is that if you default on your installment agreement, the IRS may take action to collect your unpaid tax debt, such as placing a lien on your property or seizing your assets. It`s important to make your payments on time and in full to avoid defaulting on your installment agreement.
In summary, an installment agreement is a payment plan that allows taxpayers to pay their tax debt over time rather than in one lump sum. It can be a helpful option if you`re having difficulty paying your taxes, but it`s important to understand the fees and potential consequences of defaulting on your agreement. If you`re considering setting up an installment agreement, contact a tax professional or the IRS for guidance.
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