No one intentionally falls behind on their taxes unless they’re taking cues from Thoreau’s Civil Disobedience (which by the way will hardly work in your defense in court).
While Thoreau ended up spending a night in jail and getting some material for his book, most of us would prefer to avoid the penalties imposed for tax delinquency.
For those who have found themselves unable to meet their tax requirements with the federal government due to a poor financial situation, one viable solution might be figuring out how to reach an IRS installment agreement.
What is an Installment Agreement?
Because the IRS would prefer that it receive at least some portion of your prescribed tax obligations, it is often willing to come to a compromise with the taxpayer in terms of the payment timeline and the incremental amounts one pays to satisfy his or her total debt.
This IRS installment agreement has certain restrictions in place to ensure its proper use and execution but generally speaking, the IRS is receptive to arrangements for payment installments on tax liabilities that amount to less than $25,000 dollars in total.
If your tax liability exceeds that threshold, you might encounter greater difficulty in coming to an agreement with the IRS and might require the assistant of a professional service to finesse the process for you and get you a better chance of approval from the government.
How to Reach an IRS Installment Agreement:
When you are ready to apply for your monthly installment plan, it is imperative that you take the time to ensure your plan is one to which you will be able to adhere.If you are unsure if the amount of each installment is realistically attainable for your budget, you are putting yourself at risk of defaulting on an already compromised upon debt.
Spend some extra time with an accredited firm of tax debt professionals to make sure you have all of the required documents and a realistic set of expectations going into the application process. Being well-equipped before you dive into a long term payment plan will keep you informed and prepared for your financial planning in the future.
How to Apply for a Monthly Installment Plan:
When you’ve met with the proper agency to prepare your documents and make sure that everything is in order for the application, you can visit the IRS website to download their Form 9465 which is the Installment Agreement Request. To assess the total amount of your tax liability, you can refer to your last tax return document of any notice you might have received in the mail from the IRS.
When you are filling out the application for the request, most of the information is fairly straightforward. They’ll ask for your name, residential, banking, employment and spousal information.
The form takes into account additional payment obligation information such how much you are paid and how frequently it occurs, what you pay each month in premiums for your health care coverage, what you pay each month if you own a car, as well as any dependents you may have.
This information all contributes to the IRS’ ability to assess whether or not the proposed installment agreement is a fair and viable compromise that fits your specific needs and financial obligations relative to your income.
In addition to the basic 9465 form for submission, the IRS has instructions for filing your request available on their website on the same page. The instructional document includes recent changes to the process in case you have applied for an installment agreement before.
An example of the recent changes is that the processing fee required for submitting an application for the installment agreement has increased from $105 dollars to $120 dollars by check, money order, credit card, or automatic payroll deduction. This fee is something to take into account when you are considering the viability of an IRS installment agreement request.
General Timeline:
If you are able to submit the total amount of money owed with your tax liability within 120 days, it is generally not advisable to apply for an installment agreement. You will avoid having to pay the $120 dollar application fee and can simply apply to make a payment in full either online or by calling the IRS directly.
Getting a Guaranteed Agreement:
In certain cases, you may be eligible for automatic approval of your installment proposal. If you owe less than $10,000 dollars total for your tax liability, have not applied for a tax installment plan in the past five years, agree to satisfy all tax debt obligations within a three year period, and can prove that you are not able to pay for your tax liability in the established time-frame, the IRS will accept your request. There is some flexibility in terms of your ability to pay on time if your total debt is indeed lower than $10,000 dollars.
While resolving tax debts might seem like a fairly complex process, learning how to reach an IRS installment agreement will be worth the feeling when you receive approval and can move on with your financial life.
Featured image courtesy of Flickr – Alan Cleaver
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