IRS  Payment Plan

IRS Installment Agreements 

 Short Term Extension of Time to Pay 

Note: Under the new IRS Fresh Start Program, a simplified Express Installment Agreement is

A tax relief attorney or other tax resolution specialist has the experience and knowledge to get you the best IRS Payment Plan possible to fit within your budget.

If you simply need short term IRS relief, then the IRS will grant an extension of time from 30 to 120 days. During this time no collection action will be made against you. 

IRS Payment Plans

The most common type of IRSpayment plan is also known as an installment agreement (I/A). If you are unable pay your taxes in full and you meet the requirements outlined below, the IRS will allow you to enter into an installment agreement as a method of satisfying the your IRS Debt.

If you cannot pay within 120 days then you can apply for one of several types of IRS payment plans. If you propose a payment plan, they are by law prohibited from taking any collection action against you:

• While your paymentproposal is being considered.
• While a payment plan is in effect.
• For 30 days after a request fora plan is has been rejected or terminated and 
• While an appeal of a default, termination or rejection of a plan is being resolved. 

You should put your proposal in writing, identify the type of tax liability to be covered by the agreement, state the amount of your proposed payment and the date each payment will be made.

It is also a good idea to include recent collection notices received with your proposal. Although not required, it will show good faith to begin making payments while the proposed agreement is being considered.

You should also follow up with a telephone call a couple of weeks later to verify that the proposal was received. In the past some service centers have been known to send out an IRS tax levy even after a written response to their correspondence has been sent in. If a levy has been sent to your employer or bank illegally, they will release it, but it is something you probably want to avoid. Also, you should be aware that interest and penalties continue to accrue while on an IRS payment plans.

  IRS Payment Plan Requirements 

Before you will be granted IRS relief through an Installment Agreement you must have all returns filed. This includes individual income tax returns and payroll tax returns as well as current payroll tax deposits made timely if you own a business.

In addition, you must be current on your quarterly estimated tax payments if you are required to make them. These filing and tax deposit requirements are very important and the Internal Revenue Service will not enter into any type of agreement if they are not met.

Guaranteed IRS Installment Agreement 

• If you owe $10,000 or less of income tax only (no payroll or other taxes, see example 1 below) , not including interest and penalties, you may qualify for a guaranteed Installment Agreement. 
• No financial information is required to be submitted although you may be asked employer and banking information. The IRS likes to have this information for levy sources in case you default the agreement and do not contact them to reinstate it. 
• Guaranteed Installment Agreements are generally granted even if your finances show you have the ability to currently pay the liability. 
• The liabilities must be paid within 36 months or prior to the expiration of the statute of limitations on collection, whichever is earlier. 
• To qualify for a guaranteed agreement, you must have filed all returns for the past five years prior to the year of the liability and not have been on an installment agreement during that period. 
• You must file and pay all tax returns during the agreement. 

You can apply for the Guaranteed Installment Agreement using the Online Payment Agreement Application.

You can also use the fill in request Form 9465 that can be mailed in or you can call the number on a collection bill you may have. 

Streamlined Installment Agreements

• If you owe less than $25,000 including assessed interest and penalties you may qualify for a Streamlined Installment Agreement. 
• The liabilities must be paid within 60 months or prior to the expiration of the statute of limitations on collection, whichever is earlier. 
• Can be used to pay income taxes as well as out of business taxes such as payroll taxes. (see example 2 below). 
• A lien may or may not be filed depending on the discretion of the person handling your case. 
• May be obtained by telephone or in person and without managerial approval. 
• Streamlined Installment Agreements may be granted even if your finances show you have the ability to currently pay the liability. There is no guarantee of this however. 

These agreements may be applied for by telephone, in person at a local IRS office or by mail. May also be applied for online, (see Online Installment Agreement below).

Generally Streamlined Installment Agreements do not require submission of financial information although as in the Guaranteed Agreement you may be asked about employer and banking information.

Online Payment Plans

If you owe $25,000 or less including interest and penalties, you can apply for a Guaranteed or Streamlined payment plan online using the Online Application.

You may also apply for a Guaranteed or Streamlined Payment plan using Form 9465.

If you do not qualify for a Guaranteed or Streamlined agreement, you will be asked to provide financial information by filling out Forms 433-Aand 433-Bif you are self employed with a corporation, partnership or LLC.

Form 433-F is used if you are dealing with an IRS call in site or service center. Forms 433-A and B is used if your case is assigned to a Revenue Officer which is a field collection representative.

The IRS will use the information provided in the above forms to determine if you qualify for a payment plan and if you do, to compute how much the monthly payment will be by subtracting the amount of expenses they will allow from your monthly income.

Not all personal expenses qualify to be considered in computing a payment plan amount. If the IRS determines that any of your expenses are not necessary for the health and welfare of you or your family, they will not be allowed. A tax professional experienced with dealing with IRS debt collection will be able to identify any conditional expenses before a payment plan is proposed.

If it appears that you have equity in assets you can borrow against, you will be asked to apply for a loan and supply at least 2 loan denial letters if you cannot obtain one. A word of warning though, The IRS will expect you to accept any loan offered even if you feel you cannot afford the payments. If this happens, you will be denied the installment agreement. Your only options will probably be to appeal the denial or risk enforced collection action.

The IRS no longer requests statue expiration waivers, (additional time to collect the tax) for regular Payment agreements. If the liability cannot be paid within the legal time limit, then you will have to enter into a Partial payment installment agreement.

With a few exceptions, the computation of an IRS payment plan is very similar to calculating the future income component of an Offer In Compromise. As with any IRS relief agreement, it is advisable to hire a tax professional to negotiate an IRS payment plan for you.