Some individuals and businesses owe more tax than they have funds to pay in full. If you want to avoid the IRS from taking away your assets, they have installment plans that will allow you to enter if you find you can’t pay your taxes in full.
There are a couple of ways to start an installment plan. For individuals who owe under $50,000 in tax, penalties and interest, and businesses that owe $25,000 or less in payroll taxes you can apply for an online agreement. You may also qualify for a short term agreement if your balance is under $100,000.
The online agreement (OPA) can be set up if you received a notice that you owe or if you were recently audited.
If you can’t pay your taxes in full, there is also the option of completing form 9465, Installment Agreement Request for past due tax debts. This form can be filed separately or along with the tax return you owe taxes on. The form is accompanied by form 433-F, “Collection Information Statement” which provides more detailed information to the IRS about your assets, debts, income, and expenses.
The 433-F is instrumental in helping the IRS determine how much your payments should be based on what they feel you can afford. This form is very important, failure to provide the correct information can delay your request, can cause you to be denied or result in a payment you can’t afford.
Once a plan is established it is imperative that you make your monthly payments in a timely fashion or face the possibility of having the agreement canceled. If you have a problem and won’t be able to pay, for example, a lay-off or illness it’s important to call the IRS at 1-800-tax-1040 to notify them of your problem. They can then put a hold on your account.
The installment agreement requires that you stay current with all of your tax filings. If you get behind in your tax filings the IRS can elect to terminate your plan. It should be noted that all future tax refunds could be taken by the IRS to offset your tax debts even though you have an agreement. Moreover, the IRS may at their option, lien property and bank accounts even though you have an installment plan in place.
Navigating an installment plan that is fair and equitable can be a complicated process that a CPA is trained to help you with. Having such a plan in place can be a lifesaver when funds are tight.