What Is a Tax Installment Agreement

Are you struggling to pay your taxes to the Internal Revenue Service (IRS)? Do you find it difficult to make a full payment at once? A tax installment agreement could be your solution.

A tax installment agreement is an arrangement with the IRS that allows taxpayers to pay their tax debt over time. It enables taxpayers to pay their taxes in smaller, more manageable monthly installments, rather than one lump sum.

This agreement is a way for taxpayers to avoid defaulting on their taxes and facing penalties and interest, which can accumulate quickly. It is an option for taxpayers who cannot make full payment or need more time to pay.

There are two types of installment agreements: guaranteed and non-guaranteed. A guaranteed installment agreement is available for taxpayers who owe less than $10,000 in taxes and have filed all their tax returns on time for the past five years. The IRS is required to grant a guaranteed installment agreement if the taxpayer meets these criteria.

A non-guaranteed installment agreement is for taxpayers who owe more than $10,000 or do not meet the criteria for a guaranteed agreement. The IRS may require additional financial information from the taxpayer, such as income and expenses, to determine a monthly payment amount. In some cases, the IRS may file a federal tax lien to secure the debt.

It is important to note that interest and penalties continue to accrue on the unpaid balance while in an installment agreement. However, the interest rate is generally lower than the penalty rate for failure to pay taxes. The taxpayer is also required to pay a fee for setting up an installment agreement.

To apply for a tax installment agreement, taxpayers can use the IRS Online Payment Agreement tool, complete Form 9465, or speak with an IRS representative. It is important to make timely payments on the agreed-upon amount to avoid defaulting on the agreement.

In conclusion, a tax installment agreement is a payment plan with the IRS that allows taxpayers to pay their tax debt over time in smaller, more manageable payments. It is an option for taxpayers who cannot make full payment and want to avoid penalties and interest. There are two types of agreements, guaranteed and non-guaranteed, and interest and penalties continue to accrue during the agreement. If you are struggling to pay your taxes, consider applying for a tax installment agreement to avoid defaulting on your taxes and facing harsh penalties.