An installment agreement account is a payment plan that the Internal Revenue Service (IRS) offers to taxpayers who cannot afford to pay their tax debt in full. These agreements allow taxpayers to make monthly payments over a set period of time to pay off their tax debt.
If you owe the IRS money, an installment agreement can be a great option to help you avoid penalties and interest charges and avoid collection actions like wage garnishments, levies, and liens.
To apply for an installment agreement, taxpayers must fill out Form 9465, Installment Agreement Request, or apply online through the IRS website. The IRS will review the taxpayer`s financial situation and determine the monthly payment amount based on their income, expenses, and debt.
There are several types of installment agreements available, including:
1. Guaranteed Installment Agreement: For taxpayers who owe $10,000 or less and can pay off the debt within three years.
2. Streamlined Installment Agreement: For taxpayers who owe $50,000 or less and can pay off the debt within six years. No financial information is required to apply for this type of agreement.
3. Partial Payment Installment Agreement: For taxpayers who cannot afford to pay their tax debt in full. This agreement allows taxpayers to make monthly payments based on their ability to pay, with the remaining debt forgiven after the agreement`s term expires.
While installment agreements can be a helpful tool for resolving tax debt, taxpayers should be aware of the potential downsides. Interest and penalties will continue to accrue on the debt until it is paid in full, and the IRS may revoke the agreement if the taxpayer fails to make timely payments.
If you are considering applying for an installment agreement, it is a good idea to consult with a qualified tax professional who can help you navigate the process. With the right guidance, an installment agreement can help you get back on track with your tax obligations and avoid costly collection actions.