There are two types of simplified installment agreements, depending on how much you owe and for what type of tax. For both types, you must pay the debt in full within 72 months (six years) and within the deadline for the IRS to collect the tax, but you won't need to file a financial statement. Your specific tax situation will determine what payment options are available to you. Payment options include a full payment, a short-term payment plan (paid in 180 days or less), or a long-term payment plan (installment agreement) (monthly payment).
In general, you can choose what you pay each month. That is, the IRS will ask you how much you can pay. However, if you have a long-term repayment plan, you should choose a payment amount that pays off your debt within 72 months. IRS short-term payment plans last a maximum of 120 days and are only available to individual taxpayers.
The benefit of these payment plans is that they don't involve installation fees or other charges. You only have to pay penalties related to underpayment or late payment, if applicable, and interest. You may not be able to make any payments to the IRS (that's OK, too). The IRS has a financial hardship program that places a debt in bad condition.
File all required tax returns on time and pay all taxes in full and on time (contact the IRS to change your current agreement if you are unable to do so). You can quickly set up simple payment plans, such as payment extensions and “simplified installment agreements”. Get information from H&R Block about the four types of IRS penalty relief and which IRS penalty relief option may be best for your situation. If you are a low-income taxpayer but are unable to make electronic debit payments when you sign up for a DDIA, your user fee will be refunded once you complete the installment agreement.
Submit your request online through the online payment agreement tool or by phone or by mail by submitting Form 9465, Request for an Installment Agreement. If the IRS system identifies you as a low-income taxpayer, the online payment agreement tool will automatically reflect the applicable rate. An IRS payment plan is an agreement that you make directly with the agency to pay your federal tax bill for a specified period of time. The Office of Management and Budget has directed federal agencies to charge users fees for services such as the installment agreement program.
A concern that my clients frequently express is whether entering into an installment agreement with the IRS automatically extends the time the IRS has to collect. How long it all takes depends on your situation, the type of agreement you need, and how you need to interact with the IRS.
IRS installmentplans don't affect your credit and the IRS doesn't report them to any of the credit bureaus. Or, ask a tax professional to determine which payment agreement may be best for you and even establish an agreement with the IRS for you.
If you can't pay your current taxes while you have an installment agreement with the IRS, you can add that tax debt to your current agreement. When you apply for a payment plan (installment agreement), with certain exceptions, the IRS is generally prohibited from collecting taxes and the IRS's time to collect is suspended or extended while an installment agreement (IA) is pending. These plans require much less paperwork than installment agreements that require you to submit documents that prove your ability to pay.