Setting Up an IRS Payment Agreement: A Step-by-Step Guide
The Internal Revenue Service (IRS) is responsible for collecting taxes. Failure to pay taxes can result in penalties, interest, and even legal action. If you can’t pay your tax bill in full by the due date, setting up a payment agreement with the IRS can help you avoid negative consequences. In this guide, we’ll walk you through the steps to set up an IRS payment agreement.
Step 1: Determine Your Eligibility
Before setting up a payment agreement, you need to make sure you’re eligible. Individuals and businesses that owe $50,000 or less in combined tax, penalties, and interest can qualify for a payment plan. You also need to have filed all necessary tax returns and be current with estimated tax payments.
Step 2: Choose Your Payment Plan
The IRS offers several payment plans, including:
• Installment Agreement: This is the most common type of payment plan. You make monthly payments until your tax debt is paid in full.
• Partial Payment Installment Agreement: This plan allows you to pay less than the full amount owed each month. The remaining balance is forgiven after the payment plan is complete.
• Offer in Compromise: This plan may allow you to settle your tax debt for less than the full amount owed if you meet certain criteria.
Step 3: Apply for a Payment Agreement
You can apply for a payment agreement online, by phone, or by mail. To apply online, visit the IRS website and use the Online Payment Agreement tool. To apply by phone, call the phone number provided on your tax bill. To apply by mail, complete Form 9465 (Installment Agreement Request) and mail it to the address listed on the form.
Step 4: Wait for Approval
Once you’ve applied for a payment agreement, you’ll need to wait for approval. The IRS will review your application and determine if you’re eligible for a payment plan. If your application is approved, you’ll receive a letter outlining the terms of the payment plan.
Step 5: Make Payments
Once your payment agreement is approved, you need to make your payments on time. If you miss a payment, you could face penalties and interest. If you’re unable to make a payment, contact the IRS as soon as possible to discuss your options.
In conclusion, setting up a payment agreement with the IRS is a good option if you can’t pay your tax bill in full. By following these steps, you can get on a payment plan that works for you and avoid negative consequences. Remember to make your payments on time and stay current with your tax obligations to avoid further penalties and interest.