Are you in debt to the IRS? Can you make payments on taxes? You
can make monthly payments, called installments. Here’s the minimum amount you
Have you found yourself
in a situation where you owe the IRS money that you are unable to pay? The IRS
may enforce penalties against you if you don’t pay any
taxes you owe by the specified deadline.
If this sounds like you,
you may qualify for an installment plan with the Internal Revenue Service. This
will help you pay off your tax debts over time and avoid any levies or garnishments.
You will still have to
pay interest and some penalties, but this option can take some stress off of
you and make paying your back taxes affordable.
Can you make payments on
taxes? Yes. Continue reading below to find out more about these monthly
payments, called an Installment Agreement (IA).
Fees For Installment Plans
If you can pay off your tax
debts within 120 days, you will not have to pay any additional fees. If you
need longer to pay back your tax debt you may be required to pay a direct debit
fee of $52.
You can also set up a
standard mail-in or payroll deduction plan for $105.
If you are a low-income
taxpayer, you may be able to qualify for a lower fee of $43.
Outstanding Balance Amounts
Depending on the amount
you owe to the IRS and your ability to pay, you may or may not qualify for an
Thanks to the Fresh Start program, it is now easier to
reach agreements with the IRS concerning outstanding tax debts.
You can now obtain a
streamlined installment plan for 72 months if you owe less than $50,000. You do
not have to provide any additional financial information.
This was increased from
the previous IRS streamlined installment plan for taxpayers owing less than
$25,000 over 60 months.
If you owe more than
$50,000, you will have to provide additional financial information. You will
have to do additional negotiation to obtain an installment plan.
If this is the case, the
IRS will perform a thorough investigation of your finances and ability to pay.
They will require you to provide additional information on Form 433-A or Form
433-F. This will include detailed information about all of your investments,
assets, bank accounts, and income.
You may need to sell
some assets in order to pay down your outstanding balance.
Be Current on Your Tax Returns
You will not be able to establish
an agreement with the IRS unless all of your tax returns are filed and current.
As a self-employed individual, you must make quarterly estimates on your current
You must also be current
on payroll deposits and your Form 940 and 941 if you have employees.
Agreeing on a Monthly Payment
Your request for a
non-streamlined IA will begin with providing your financial information to an
IRS Collection’s Officer. He or she will look at and review the information on
Form 433-A or Form 433-F.
The IRS Collection’s
Officer will determine the amount that you will be required to pay each month
on your installment agreement based on the information you provide.
However, you can
influence the decision. You may wish to propose a monthly payment amount when
you submit the Form 433-A. There are
also certain expenses that the IRS allows you to have that may reduce the
amount of your monthly installment agreement payment.
Make voluntary payments.
If you voluntarily make payments before your installment agreement is approved,
you may be more likely to reach an agreement.
This will also reduce your total tax debt and the amount of interest and
penalties that are accruing.
This also demonstrates
It may take several
months for you to receive notice from the IRS regarding this agreement.
What If I Am Not Approved?
There is a chance that
your request will be denied. This could be for several reasons.
The IRS may determine
that some of your living expenses are not necessary. This could be private
school tuition, high credit card payments, or donations. The IRS does not
consider these payments when determining your ability to pay.
Expect the IRS to push
back against any “extravagant” expenses.
The IRS may also find
that you have provided incomplete or untruthful information. This could be if
you are hiding income or property. Don’t
expect to get away with this.
The IRS may also require
you to provide additional information to show that you are not able to borrow
against equity in your assets.
The IRS may also deny
your request if you have defaulted on a previous IAs.
If you are initially
denied, you can continue to negotiate. You may also need to request to speak
with a manager or file an appeal on the denial.
When the IRS Revokes an Installment Agreement
If you are approved for
an IA, you are bound by the terms outlined by the IRS. If you fail to comply,
your IA may be revoked.
You must continue to
file your tax returns and pay each year’s tax balances.
The IRS must receive
each monthly payment by the payment deadline
The IRS may review your
financial situation every year or two and ask you to fill out a new Form 433-A.
If your financial situation changes significantly your IA may be revoked.
The IRS may revoke your
IA if they find out you provided inaccurate or incomplete information on Form
Paying Your Taxes on Time
In order to avoid this
struggle, you should try to pay
your taxes on time. This will save you from accruing additional interest.
It is possible to pay an
IA over several years and owe more than you originally did. This is because of
the high interest rates and penalties on the unpaid tax balances.
Even if you cannot pay
your balance in full, you should still file your return on time. This will save
you penalties for filing late.
Can You Make Payments on Taxes? Yes.
If you find yourself in
a messy financial situation, you may be asking yourself, “Can you make
payments on taxes?”
The simple answer is
However, you may need to
provide further financial information, and you will need to make sure you can
make the monthly payments.
In general, it is better
to file on time and make sure you can pay your taxes. However, sometimes stuff
If you do find yourself in this situation, you may need professional help. Austin & Larson Tax Resolution of Saginaw, MI offers a range of services to help you.