Installment Agreement: A Solution To Your Tax Paying Problems
Living in the States has its benefits, but paying taxes has become an issue for many these days. Maybe there is too much debt, and you need some help with installment agreement. Similarly, numerous financial reasons can stop you from fulfilling your citizenship duty.
So, how do you capture the perfect tax debt relief?
If you owe the IRS and cannot pay that amount now, an Installment Agreement can be perfect!
As per a survey in October 2021, the average American paid 13.29% of their income in taxes in 2019.
There are multiple ways to help you through the tax paying process. One way of taking care of your tax liability is through an Installment Agreement. Here’s everything you need to know about them.
What are Installment Agreements?
These agreements are a payment option that assists you in paying off your tax dues in part or fully. It is a payment plan that helps you become debt-free over time. Moreover, Installment Agreements are established by the Internal Revenue Service (IRS).
Due to them, every taxpayer is allowed to pay off their tax debt through this plan.
Even though the IRS is willing to help, they encourage every taxpayer to pay off their taxes as soon as possible. Otherwise, there will be a penalty of 0.5% for every month the tax remains unpaid, which can go up to a maximum of 25% of total dues.
There is also an interest that is applied on a three-month basis. The interest is calculated with a federal short-term rate plus 3% of the unpaid tax amount.
In an unprecedented event, when you cannot pay your entire tax debt, you can apply for an Installment Agreement. Furthermore, this is an alternative solution offered by the IRS. They allow the taxpayers who owe large debts to settle them without hassle.
With an Installment Agreement, the taxpayer can have the opportunity to pay their debt in smaller or manageable amounts.
Types of Installment Agreements
The IRS offers four types of Installment Agreements that you can be eligible for. You should only request a payment plan if you cannot pay your taxes in the expected timeframe.
It should always be a last resort for your tax issues. But, why? That is because of the user fee you are liable to pay.
If you are certain, here’s some information on the different monthly payment plans.
Guaranteed Installment Agreement
- Your total tax debt should be below $10,000, excluding the penalties and interests.
- It would be best to have a clean paying taxes record for five years (filed returns, paid taxes you owned).
- Payment of a minimum monthly plan is needed. It can be calculated with the tax liability, penalties, and interest divided by 30.
- You are not eligible if you have applied for an Installment Agreement in the past five years.
- You are unable to fulfill your tax liability within 120 days of the due date.
- The liability gets paid within 36 months.
Streamlined Installment Agreement
Anyone who can qualify for the Guaranteed program can also be eligible for this one. Even then, here are some of the modified requirements:
- There are two tiers of eligibility:
- Unpaid balance of less than or equal to $25,000
- Unpaid balance between $25,001 to $50,000
- You need to pay the balance within 72 months.
- The payment proposal is greater or equal to the “minimum acceptable payment.”
- You must pay a fee which will help set up the agreement.
Partial Payment Installment Agreement
This program allows the IRS to agree with you to facilitate a partial payment for the liability.
If you want to qualify for this, you need to fill Form 433-F with your financial statements. Moreover, it assesses your income and other living expenditures. After that, the IRS will review the information, verify it, and offer a proper course of action.
They will determine any valuable assets to help pay the debts.
Once your application gets approved, you need to be part of a financial review every twenty-four months. Therefore, this might help you increase the Installment Payments or its termination, depending on the situation.
Non-Streamlined Installment Agreement
If you have a debt of $50,000 or more, then this would be a good option. However, it would be best if you negotiated with the IRS and file Form 433-F again.
The IRS will take a few months to review the proposal and consider your eligibility. Ideally, your assets, living expenses, previous debts, income, etc., will determine that. Moreover, they can also reject the application based on failure to cooperate.
Even if you cannot pay the tax liability through this agreement, you must fill out an “Offer in Compromise.”
Note: If you have filed bankruptcy or the IRS has accepted your “Offer in Compromise” request, you will no longer be eligible for Installment Agreements.
Making Payments for the Installments
Every taxpayer is eligible to make payments through:
- Credit Card
- Electronic Federal Tax Payment System (EFTPS)
- Online Payment Agreement (OPA)
- Direct Debit
- Payroll Deduction
- Money Order
Note: The IRS can even revoke your agreement if you miss a payment or do not file the tax return. Also, when they find inaccuracies in your information.
How Does CuraDebt Help with Installment Agreements?
At CuraDebt, we focus on offering expert consultation and assistance for your financial goals. We assess your situation and provide timely advice.
We have been in this business since 1996, and our team consists of qualified representatives who can provide help for IRS tax issues.
So, we know how to request an Installment Agreement. Indeed, our team will walk you through the filing and reviewing processes seamlessly.
From payment options to choosing agreements, we are going to support you. Feel free to call us at 877-999-0486 to get a free tax consultation.