Can You Get an Installment Plan to Pay Tax Debts?

If you find that you owe a tax debt to the IRS then you are probably wondering what your options are, and whether the IRS will allow you to use an installment plan in order to pay what you owe. Taxpayers who owe a tax debt of $50,000 or less are normally approved for a 72 month payment plan without any problems simply by asking for this option. If more than $50,000 is owed then you will need to provide the agency with your financial information and do some negotiating.

You will not be able to get a monthly installment agreement if you have not filed all tax returns due before the current year. Self employed individuals must also be current on their quarterly estimated taxes as well. Employers must be up to date on all of their payroll deposits and also their Form 941 submissions.

Payment plans with the IRS do have some disadvantages. You will continue to pay high interest rates and penalties until your tax debt is completely paid off, and sometimes you can end up owing more than what you initially did in the beginning. There are other options available if your income is not sufficient to cover your expense sand a monthly installment payment.

Helpful Tips About Your Monthly Installment Agreement Payments

• Make sure that the payment plan you are proposing is one that you can actually follow through on. Put your plan in writing and submit it when you submit the Form 433-A.
• The minimum amount you should propose is what is left from your income after your necessary monthly expenses are paid. Never offer a higher payment that you can not afford just so that your chance of approval is higher, this is a big mistake because you won’t honor your tax liability and tax bill.
• Send the first payment with the completed forms, and then make a payment each month even if you have not heard anything from the IRS yet. The approval process could take months.
• Until the Internal Revenue Service sends you an approval or rejection letter send your payments to the local service center in your area, have your employer perform a payroll deduction for the payment amount each month, or authorize a direct debit for the monthly payment through your bank. 

Installment Agreement Rejections and Revocations

There are usually only three main reasons why your installment agreement proposal would be rejected by the IRS:

• You have extravagant living expenses which the IRS does not consider necessary, like private school tuition or large monthly charitable contributions.
• You have not provided accurate, honest, and complete financial information on the Form 433-A.
• You had a previous installment agreement with the Internal Revenue Service and defaulted on this agreement.

If you are initially rejected then keep trying to negotiate with the agency, and if necessary request that you be transferred to an agent's manager and then even further up the chain of command if necessary.

If you are approved by the IRS for an Installment Agreement then the terms of this agreement are binding, both on you and on the agency unless certain circumstances exist, and these include:

• Failing to pay taxes and file returns that become due after you have an approved IA.
• Missing even one installment payment due under the agreement.
• There is any change in your financial situation, whether this change is positive or negative.
• The Internal Revenue Service discovers any inaccuracies or details that are missing in the information that you provided to qualify for the agreement.