What is an Installment Agreements with the IRS?

If you owe back taxes to the state or the federal government, we can help. Our experts can work on your behalf to negotiate a manageable, fair installment agreement or other means of resolution with state or IRS tax authorities.

What is a Tax Installment Payment Plan?

As the name implies, a tax installment plan is a means of paying off your tax liability in a series of payments over a set period of time.

How Do Tax Installment Payment Plans Work?

Successfully negotiating an installment plan allows you to settle your tax debt while avoiding further collection actions like tax liens or levies. For resolving debts to the IRS, there are three main types of payment plans:

  • Short-term Payment Plan: Falls within a 120 to 180-day window. In order to qualify, the amount owed must be less than $100,000, penalties and interest included.
  • Long-Term Payment Plan: Up to 72 months. Generally, the amount owed must be $50,000 or less, penalties and interest included. For businesses, the amount is $25,000, and all required tax returns must be filed. If you are the sole proprietor of a business, the criteria are the same as for an individual.
  • Extended-Term Payment Plan: Based upon your income, liabilities, expenses, and the IRS’ allowable expenses. Unlike other plans, extended-term payment plans are not based on a timeframe, but instead on what you can afford to pay. These plans are generally negotiated by firms, such as Larson.

Installment payment plans may be negotiated by firms like Larson Tax Relief, and will be based on your income, liabilities, expenses as well as IRS’ allowable expenses outlined in their national standards of living. These are payment plans that are not based on the number of months offered by the IRS, but moreover based on what the client can actually afford once their income and bills are taken into account.

When it comes to payment plans for state tax debts, options vary by state. Typically, they account for income and expenses. To learn more, contact your state’s department of revenue or taxation.

Minimum Monthly Payments

The IRS determines the minimum monthly payment for long-term payment plans. In most cases, this figure is the total balance divided by the maximum 72 months available to pay it off. Minimum monthly payment plans for state tax debts depend on the state.

Fees and Costs for IRS Installment Payment Plans

IRS payment plans come with the following fees and costs:

  • Short-term Payment Plan: $0 setup fee for online, phone, mail, or in-person application.
  • Long-term Payment Plan with a Direct Debit Installment Agreement (DDIA): $31 setup fee for an online application, or $107 if done by phone, mail, or in-person.
  • Long-term Payment Plan without a DDIA: $149 setup fee for online application, $225 for other methods.

If you meet low-income criteria, you may qualify for a $43 setup fee. Until your debt is paid, you will still accrue interest and penalties.

Ways to Pay for Your Tax Installments

Short-term payment plans allow you to make payments with the following methods:

  • Direct Pay from your checking or savings account (individuals only)
  • Debit or credit card, check, or money order (fees apply)
  • The Electronic Federal Tax Payment System (EFTPS)
  • Long-term payment plans with DDIAs make automatic monthly deductions from your checking account. If you don’t have automatic payments, you can use the above methods to make payments.

How to Apply for an Installment Payment Plan

You can apply for an installment plan on the IRS website or by calling the IRS directly at 1-800-829-1040.

Individual applications require the following:

  • Your name and address as they appear on your most recent tax return
  • Your Social Security number or Individual Tax ID Number
  • Your email address
  • Your date of birth and filing status
  • Your total balance due (if applicable)
  • Your financial account number, mobile phone number, or an activation code (for verification purposes)

Business applications require:

  • Identity verification information (same as above)Your Employer Identification Number
  • Your address as it appears on your most recent tax return
  • The month and year your business was established
  • Your Caller ID from the notice sent by the IRS
  • Your total balance due, tax period filed or examined, and tax form filed or examined if applicable

Contact the relevant tax authority to learn about the application process for installment agreements for state debt.

Reaching an installment agreement with the IRS is complicated. The experts at Larson Tax Relief can explain your best options for resolving your debt, and help you complete the plan you choose to move forward with.

How to Review and Update Your Installment Payment Plan

Once you’re approved for an IRS payment plan, their Online Payment Agreement tool allows you to make changes to your plan if needed. You can change your monthly payment amount or due date, update routing and bank account information, and even switch over to a Direct Debit agreement. The tool also has a reinstatement request feature in case you default on your plan.

Making changes online comes with a $10 fee, or an $89 fee for all other methods. For low-income taxpayers, there is no fee for DDIA modifications, and the fee for other changes is $43, which is reimbursable in some cases.

Other Larson Tax Relief Services

Whether you need emergency or long-term tax relief as an individual or a business, Larson Tax Relief can help. Our experienced professionals can find optimal resolutions for your tax issues while keeping collection actions at bay. In addition to installment agreements, our services cover:

About Larson Tax Relief

Larson Tax Relief is a family-owned and operated tax resolution company that’s been helping individuals and businesses around the US since 2004. With an A+ rating from the Better Business Bureau, Larson is comprised of 65 employees, including 17 federally licensed IRS Enrolled Agents.

One of those agents is Larson co-founder and company president Jack Larson, who is a member of both the National Association of Enrolled Agents and the National Association of Tax Professionals.

To learn more, or to get a free evaluation of your situation call us today at 888-589-0955 or fill out our online form below.

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