Can I Pay Installments on Federal Income Taxes I Owe If I Can't Afford to Pay it All at Once?
Despite the IRS being slammed right now due to COVID-19, millions of Americans still owe money to the IRS in back taxes for previous years and they’ll increasingly find themselves unable to pay up all at once.
In this article, we walk you through IRS installment agreements and what to do if you can’t afford to pay your back taxes.
Though paying your taxes through an installment agreement is just one of many tax relief options, you likely have other options and might be able to settle with the IRS or lower your amount owed. We encourage you to reach out to our firm for a tax relief consultation to determine your options. Contact us at 860-398-4458.
HOW THE IRS IS DEALING WITH COLLECTIONS DURING COVID-19
COVID-19 forced a lot of things to shut down or modify how they do business, including the IRS.
Not only are they busy dealing with processing their usual tax returns, the IRS was tasked with processing the stimulus payments for millions of Americans.
To top it all off, they’re scrambling trying to adjust to the new filing deadline, and a lot of their workforce is working from home, making things slower than usual.
Because of this, and due to the economic hardship millions of Americans are experiencing, the IRS announced it’s “People First Initiative”.
The IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions.
Due to COVID-19, the IRS isn’t processing paper returns right now as they deal with distributing coronavirus stimulus checks.
They also extended the filing deadline for your 2019 taxes another 3 months from the usual filing deadline, making the official deadline to file your taxes July 15th, 2020.
THE BILL COMES DUE
Despite their immediate actions, the IRS will soon flip the enforcement switch back on, and come July 15th, a lot of people who made higher income in 2019 will likely owe back taxes.
At the time you file, you need to send in payment for any taxes due. Failure to pay your tax bill immediately often results in penalties and interest on the balance due after July 15th.
If you find yourself unable to pay in full, the IRS offers installment agreements to taxpayers who owe a balance to allow them to pay their tax burden over a period of time.
HOW INSTALLMENT AGREEMENTS WORK
The IRS divides their installment plans by taxpayers who owe more than $50,000 and less than $50,000.
IMPORTANT: We highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and a properly structured installment agreement made by us can save you money and time in the long run. You might also be eligible for other relief programs or get your penalties and interest forgiven. Reach out to our firm today for a consultation. Contact us at 860-398-4458.
Balance Less Than $50,000
Taxpayers owing less than $50,000 may request an installment agreement via the IRS website, by mailing Form 9465-FS Installment Agreement Request or by phone at 1-800-829-1040. You need to provide your Social Security number, date of birth, caller ID from your recent IRS notice, PIN number or AGI, bank address, employer address and the proposed monthly payment amount.
Balance Greater Than $50,000
Taxpayers owing more than $50,000 may request an installment agreement by filling out form 433-F Collection Information Statement. Filling out the form requires information regarding your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount and proposed monthly payment.
IRS Installment Agreement Details
Installment agreements require a minimum monthly payment of $25. The IRS requests that you include your name, address, Social Security number, phone, tax year and return number on each payment issued. Installment lengths vary from 120 days to 60 months depending on your ability to repay.
IRS Installment Agreement Fees
Installment agreements that take more than 120 days require a setup fee. The IRS charges a setup fee for direct debit agreement or for a standard agreement. You may get a decreased fee if you meet their low income guidelines. The IRS charges a reinstatement fee if you don't pay your bill and your installment agreement goes into default.
Our firm specializes in tax resolution. We also serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Contact us for more information at 860-398-4458.