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IRS Payment Plans and Installment Agreements

Filing your tax return on or before April 15 and paying all taxes due is considered the practical thing to do. However, practical is not always possible when you have an IRS debt that exceeds your household budget. Fortunately, you are not out of options if you are not prepared to pay the full balance. Initiatives implemented by the IRS allow taxpayers to qualify and apply for alternative payment programs.

Known as an Installment Agreement or Payment Plan, you can negotiate a way to resolve IRS back taxes by making monthly payments. These programs offer an incentive to pay back taxes over a period of time rather than one lump sum payment. Once the program is established, no collection activities will occur as long as you stay current on payments and future filing obligations.


Negotiating an Installment Agreement on Your IRS Debt

Terms that affect how negotiating an installment agreement on your IRS debt will largely depend on the amount of back taxes you owe. Keep in mind that penalties and interests will continue to accrue regardless of which payment plan agreement you receive. Generally, circumstances surrounding an amicable payment plan between you and the IRS will vary if you owe:

  • $10,000 or less
  • Between $10,001 and $49,999
  • Between $50,000 and $100,000
  • Over $100,000

When you have filed all income tax returns and your tax debt is $10,000 or less, you can qualify for a reasonable payment plan. The agency expects that the balance will be paid in full within 36 months. In some cases, you might not need representation from a tax specialist.

You could also resolve problems with IRS back taxes if you owe between $10,001 and $49,999. Basically, you will need to submit financial disclosure documentation on a 433-F Collection Information Statement. The requirement to file all tax returns is still necessary to qualify for a streamline payment plan when owing an amount within this range. In most cases, you will have up to six years to repay the IRS debt.

Back taxes totaling between $50,000 and $100,000 requires meeting the same requirements for lesser amounts owed. In addition, you are required to submit full financial disclosure documentation through form 433-A, which is also a Collection Information Statement. Supporting documentation such as proof of income, bank statements and living expenses is also required.

For IRS back taxes totaling over $100,000, you should seek guidance from a tax specialist. As with IRS debt more than $50,000 but less than $100,000, full disclosure is required. Before the IRS is willing to accept an installment agreement, you may need to liquidate assets to satisfy the debt.


Hire Professional Tax Specialists to Negotiate a Payment Plan for IRS Back Taxes

Dealing with IRS back taxes is a confusing and intimidating experience for most taxpayers. For this reason, hiring a professional tax specialist can help to ease the anxiety of resolving issues with back taxes. A tax specialist has the acumen and experience in negotiating payment plans whether you owe $10,000 or more than $100,000.

With a team of tax specialists, tax attorneys and CPAs negotiating on your behalf, the chances of settling IRS back taxes greatly increases. In some cases, these professionals could negotiate a settlement that is less than your total debt. The team will also help you prepare past tax returns to increase your chances of having a payment plan approved.


Other Options if You Do Not Qualify for a Payment Plan for Back Taxes

If for any reason you do not qualify for an installment agreement, a tax specialist will pursue other avenues for settling your IRS debt. Based on your income and assets, an offer in compromise could be an alternative payment option. An alternative option is penalty abatement if you suffered a natural disaster that restricted you from filing an income tax return.

Another possibility is placing your tax account into a "currently not collectible" status. This prevents the IRS from pursuing collection efforts and removes your responsibility for making payments.

With a qualified tax specialist on your side, a resolution to problems with back taxes is just a telephone call away. Owing the IRS is one thing; knowing that you can have a fresh start with a negotiated payment plan can lighten the load.

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