Although many taxpayers are frightened by the very prospect of the Internal Revenue Service or the IRS, they are actually benevolent to some degree and offers flexibility with payment plans. One of their most friendly payment schemes is through installment agreements.
Steps for an IRS Installment Agreements
- Your first step should be to determine your outstanding balance when it comes to unpaid taxes. You can directly call the IRS for inquiries or you can secure copies of your tax returns to verify your tax liabilities. Note that the entirety of your tax debt is composed of your original tax due, penalties and even interest.
- The IRS charges a user fee for opening a tax debt payment plan. Here is a matrix of charges depending on your preferred payment arrangements.
- $52 for direct debit installment agreements
- $105 for new installment agreements without direct debit
- $45 for restructuring or for reinstating a defaulted installment agreement
- $43 for low income taxpayers
- File the necessary paperwork.
- Select your preferred day of the month for making your payments. This should be consistent every month and you can choose any day from the first day up to the 28th.
- Choose the monthly payment you can pay out consistently. You always have an option to pay more than what is required to eliminate your debt quickly. But this monthly payment is your baseline amount which you must fulfill regularly. For payments, the available means is through check, money order, credit card, EFTPS or the automatic withdrawal from your checking account.
Tips to Gain an Edge in IRS Installment Schemes
Before being accepted in an installment payment plan, you have to submit your tax returns first. You also need to file all of your back taxes.
If you will be sending payments using check or money order, make sure you mail the IRS between seven to ten days before the due date in order to avoid problems.
Avoiding Penalties and Interest
Debt is always associated with penalties and interest so to avoid further problems, always pay your monthly payment in full. Failure to file tax returns can also incur penalties so you have to attend to this as well.
To avoid the combined might of the penalties and interest imposed by the IRS, you should also consider financing your tax debt using loans from a financial institution. Normally, these loans have lower interest rates.