IRS Payment Plans Frequently Asked Questions

Owing the IRS can lead to penalties and hefty fines. IRS debt can increase quickly. So, it is best to take appropriate steps as soon as possible. For taxpayers who don’t file their returns on time, the IRS files one on their behalf. Moreover, this substitute return might not have all the credits and deductions that the taxpayers can claim. If you don’t pay your taxes, the IRS will be forced to take action. Setting up IRS payment plans is the solution.

IRS has the power to seize your assets, bank accounts, and vehicles. So, if you can’t pay your debt, you can hire a tax resolution service like the Platinum Tax Defenders to set up an IRS payment plans It is not a simple process and if you decide to do it by yourself, you might end up getting confused and making a mistake. To help you with the payments, here are the answers to the most frequently asked questions about the IRS payment plans:

How can I set up IRS payment plans?

The best way of settling a tax debt is to ensure that you pay the correct amount as soon as possible. There are penalties for not filing, not paying, and underpayment. On the due balance, daily compounding rates will accrue that are recalculated quarterly. But, if you can’t pay your taxes in a lump-sum amount, you can always ask the IRS to set up a payment plan. The plan will depend on the owed amount and your tax situation. You can set up a payment plan with the IRS online, by mail, over the phone, and in person. For applying by mail, you will have to fill and submit the IRS Form 9465. Every payment option will have a different time frame, fees, and debt-amount thresholds. 

What are the different types of payment plans?

Taxpayers who money to the IRS can choose one of the several available payment plan options. These options can be short-term or long-term. A long-term payment plan where the IRS gets the money automatically from the bank is known as DDIA or Direct Debit Installment Agreement. The former is usually 120 days or less while the latter can be extended up to 6 years. There will be different fees for every option. The setup costs for long term agreement is high. But, if you fall in the low-income tax bracket, you can get the setup costs reduced. 

How do I know if I qualify for the IRS payment plans?

Your eligibility for IRS payment plans will depend on the owed amount. Taxpayers who owe less than $100,000 can qualify for the short term payment plan of 120 days or less. Taxpayers who owe less than $50,000 can apply for a long-term payment plan that lasts more than 120 days. For qualifying for a payment plan, it is important that you file all the required tax returns. This includes missing payments as well. Also, for selecting the installment agreement plan, you will have to consider making estimated payments.

How can I make payments?

There are different payment methods for different payment plans. For example, in the case of DDIA, payments will be withdrawn automatically from your bank account. In some cases, you can use the IRS PayNearMe option for paying with cash. However, this option is available for payments less than $1000 per day and does not include the fee associated with each payment. For making the online payments, you can use the EFTPS or the Electronic Federal Tax Payment System. Other methods that can be used for making the payments are a check, debit card, credit card, or money order. There are some unique fees or costs associated with each of these payment methods.

IRS payment plans
IRS payment plans

Can the IRS use my refund as a payment?

This will depend on the owed amount and your tax situation. The IRS can seize your federal or state tax refunds. If you have set up a payment plan, all the refund will be applied automatically towards the liability. This will help in reducing your debt. If you are married and you and your partner have filed jointly, both of you will be fully and equally liable for the debt. In such cases, you can use the IRS innocent spouse options to qualify for the debt relief. You can get all the information from a tax relief expert.

What happens if I miss a payment?

If you miss the monthly payment, your IRS payment plans can be terminate. However, if your financial situation doesn’t allow you to make a payment, you have to call the IRS and ask for permission to miss a payment temporarily. Also, if after signing the installment agreement, your financial situation has worsened and you can no longer afford to pay the amount, you can negotiate the payment amount.

Can I get a payment plan for business taxes?

It is possible to get a payment plan for business taxes as well. The application will depend on the type and structure of the business. For example, if you are a single-member LLC or a sole proprietor of a business, you can apply for a personal payment plan. Businesses who owe $50,000 or less can apply for a streamlined payment plan. Failure to pay taxes can lead the IRS to get a federal tax levy or lien against you. This can result in your assets being seized. Depending on the management of the business, your business debt can be satisfied with your personal assets.

Can the IRS forgive the debt?

No, the IRS won’t forgive your tax debt. However, there are some ways you can use to reduce the owed amount. For this, you have to be eligible for the tax relief from the collection actions of the IRS. Also, to lessen the penalty on the owed taxes, you can apply for penalty abatement. By demonstrating that you cannot pay the amount without causing economic hardship for you, you can ask for a Currently Not Collectible status. To negotiate a lowered amount, you can send in a request for an Offer in Compromise. The last option is declaring bankruptcy. However, there is some tax debt that can survive bankruptcy. 

IRS Payment Plans Done by Tax Resolution Firms

There are many such queries that you might have regarding the IRS payment plans. Therefore, it is best to get the help of a tax attorney or a tax resolution service to help you with your tax-related issues. They can help you get the correct credits and deductions. Also, they can help in negotiating the amount to settle your tax debt.