What to Know Before Requesting an IRS Payment Plan
A poll conducted by LendEDU revealed that approximately 39% of Americans have experienced or are currently suffering from fees, penalties, interest, or collections related to tax debt. Tax debt can be a primary source of stress, especially if you are unable to comply with the IRS deadline.
Lucky for the taxpayers, the IRS has a variety of payment plans, which are better known as installment agreements, that will allow a taxpayer to pay off the tax debt in small, manageable monthly installments over a longer period.
Before entering this kind of arrangement, you need to have complete information regarding the process, types of plans that are in place, and fees/interest that may apply as a point of knowledge before the IRS payment plan application.
An IRS installment agreement attorney can assist not only in determining eligibility but also in providing support throughout the procedure. They will be able to help you get the most favorable plan, no matter the amount of your tax debt or its duration.
When you choose an installment agreement, you not only select the most convenient method to pay your taxes but also guarantee legal compliance while avoiding any further IRS penalties.
Let’s discuss the key factors you need to account for before entering an IRS payment plan.
Understanding Eligibility Requirements
A primary condition for an IRS payment plan is that the total amount owed, consisting of taxes, penalties, and interest, should not exceed $50,000.
In the scenario of a company, the restriction is $25,000. Another requirement is to have all your tax returns filed. Being honest about your financial position is necessary since the IRS may call for further information. When you know about these, you will feel confident in your application.
You are not required to undergo this whole process by yourself. A lot of people have found relief in payment plans, and knowing these conditions is the initial step towards getting that relief.
Types of IRS Payment Plans
There are different types of IRS payment plans, and you need to learn about them while managing your tax debts. Primarily, there are two types: installment agreements and short-term payment plans. An installment agreement is to pay off a balance over time by making scheduled monthly payments that fit your budget. This approach is excellent for debts exceeding $10,000.
A short-term payment plan is allowed for common people who can pay their tax debt within 120 days. There won’t be any setup fees for the short-term payment plan, and you will be required to clear your balance quite soon.
According to an IRS installment agreement lawyer in Southlake, it is critical to arrive at a workable amount with the IRS once a payment plan is deemed appropriate. By being informed of the different plans available, you will be able to select the one that caters to your requirements and helps you regain your financial freedom and peace of mind.
Preparing Your Financial Information
Organizing your financial information effectively facilitates the process of requesting a payment plan from the IRS. Start with the income information, like pay stubs and any other income sources. Then, draw up a list of your monthly expenses classified under housing, utilities, groceries, etc.
These papers will help your cause, as they clearly present your financial capability. You can submit any assets you may have, for example, savings accounts or property. Having this evidence at your disposal lets the IRS know you are serious about settling your tax debt.
Think of any special circumstances affecting your ability to pay, too. When you are organized and transparent, you will feel more confident in asking for that repayment plan if you are actively taking steps toward financial stability.
Potential Penalties and Interest
Understanding possible penalties and interest on unpaid taxes becomes important just after collecting financial information. If the tax bill is not paid on time, penalties accrue from the IRS very fast. You might indeed be subject to a heavy failure-to-file penalty when missing the due date.
Interest accrues each day on balances unpaid, causing your debt to get bigger in a way you never imagined. These extra charges might add to your burden. Keeping that in mind, you are already on the way to fulfilling your tax duties along with the correct payment of any related penalties and interest.
Tips for Submitting Your Request
If you don’t know what to expect, applying for an IRS payment plan can be frightening. Keep all requirements ready, such as your tax returns and financial statements. These documents could be beneficial to your case.
A detailed submission of your form may help you inform the IRS about your situation. It would be smart to propose a payment amount per month that is within your financial means and would not disrupt your lifestyle.
Review your form for any errors before submitting it since errors could contribute to lengthy delays before getting an approval.
There is always the option to call the IRS directly and speak to them if you have any doubts.
