Manage Your Tax Payments through an Installment Agreement

After people have filed for their annual tax return, they realize that they owe the IRS a large amount of money. What makes matters undesirable for them is recognizing that they don't have sufficient funds to cover all these tax debts. Good thing that this kind of IRS problem is made much more manageable because of the availability of a number of options for the taxpayers. Among these is the setting up of an installment agreement.

The IRS is very willing to accept monthly payments. In fact, they even permit you to set the amount you would like to pay on a monthly basis and on which date that it is due. Actually, if you have filed a tax return and paid your taxes in a timely manner, your tax bill amount is equal to or less than $10,000 and you have somehow proven that you don't' have that much money readily available, the IRS can't turn down your request for installment payments. The catch is that the monthly installment plan that you propose must sufficiently pay off the total tax debt within at least three years. To begin the process, you should fill out and attach Form 9465 (Installment Agreement Request Form) to the front of the tax return you are filing.

The IRS may offer the option to make partial payments of tax liability in cases when the taxpayer is really financially incapacitated. Specific financial details, such as those relating to their equity assets, are obtained from those who wish to avail of this option. It is important that the pieces of information provided are consistent and correct as these will be verified by the IRS. Also, every two years, the IRS will check if the taxpayer is already in a better financial capacity. If so, the monthly payment will be increased or the arrangement, be altogether, ended.  Although slightly different, this type of understanding is an installment plan nonetheless. 

The only problem of installment options is the fact that the longer you stretch your payment agreement, the more money you will be required to pay the IRS. In installment plans, you are essentially buying time from the IRS to pay for what you owe them. Certain fees are also incurred for any installment agreement. The IRS charges you with a one-time fee of $105 for an approved installment plan. If you choose a direct debit agreement, which requires you to debit monthly payments from your bank account, the fee is reduced to $52. The fee even goes to as low as $43 is you meet the criteria for the lower income bracket.

While many people perceive installment plan as a viable option in paying off all of their tax debts, others don't look at it that way. In fact, a better recourse for them would be to propose what is called an Offer in Compromise to the IRS. Basically, this involves offering a lump-sum amount that is considerably lesser than the total tax dues in the hopes that a certain percentage of the debt is forgiven. Again, it is very important to note that when an IRS problem calls for the measures discussed above, it is best to seek the assistance of a tax attorney or some other tax professional.

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Originally posted 2008-10-03 17:25:31. Republished by Blog Post Promoter

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