If you find that you’re unable to pay back debt owed to the IRS, you can arrange to make payments through an installment plan. If you pay in full, you are able to avoid paying penalties and interest.
Before applying to pay via installment plan, make sure all required tax returns have been filed.
Here are the requirements for the online payment agreement:
- You must owe $50,000 or less in combined individual income tax, penalties and interest with all tax returns filed.
- If you are a business, you must owe less than $25,000 in payroll taxes with all returns filed.
- If you meet the requirements above you are eligible to apply to pay by the installment plan.
If you are not eligible to pay online via the agreement, you can still pay in installments. In order to do this, you must fill out Form 9466, Installment agreement request and Form 433-F Collection Information Statement.
If you are a small business, you can apply for an in-Business Trust Fund Express installment agreement.
Before you apply to pay via the installment agreement, be aware of what is required to avoid default.
Below is a list of what you need to know:
- Future refunds will be applied to your tax debt until it is paid in full.
- Pay at least the minimum payment on time.
- Always include your name, address, SSN, daytime phone number, tax year and return type when you send in a payment.
- Make sure all required tax returns are filed on time and pay all taxes in full on time. If this is not possible, you must contact the IRS to review your existing agreement.
- Even if your refund is applied, make all scheduled payments.
- Keep your contact address up to date so that you are sure to receive your statements. Even if you do not receive a statement, send your payment to the address listed in your agreement. Make sure to keep a copy of it on hand, just in case.
If your agreement goes into default, you may be subject to a reinstatement fee. You will also accrue penalties and interest until the debt is paid in full. Always call the IRS if you are in danger of going into default to make arrangements so your debt doesn’t go into collection. The IRS will not generally take collection action if a new installment plan is being considered, while an agreement is in effect, for 30 days after a request is rejected, or during the period the IRS evaluates an appeal of a rejected or terminated agreement.
To make sure your taxes are filed in a timely manner and you will not be in danger of going into debt, or defaulting on your payment agreement.