This series is intended to be useful in setting up IRS Payment Plans without professional help. First, the new IRS rules regarding the Streamlined Installment Agreement are explained for setting up payment plans when less than $50,000 is due to the IRS. Next are a few pitfalls that you should be aware of when setting up a Streamlined Installment Agreement with the IRS that can cause the plan to fail, and the related dangers of providing bank account and employment information if you don’t qualify under the IRS’s new rules. Finally, a brief overview of the more complicated installment agreement rules are provided to assist in more difficult cases or if someone is unsuccessful when attempting to set up a Streamlined Installment Agreement.
When trying to set up an IRS Payment Plan (the IRS terminology is Installment Agreement), there are a few things that you should know. It really depends upon a few things when determining how to approach it. First, the NEW IRS rules make it pretty easy to set up your own Installment Agreement under the new Streamline provisions. Keep in mind that these new rules are NOT law. They are the IRS’s internal policy regarding the Streamlined Installment Agreement program. These rules can change, and additionally, the IRS cannot be FORCED into following them. However, they are currently available and very pro taxpayer!
The new rules allow you 6 years to pay off the debt (if you otherwise qualify); and only apply if you owe $50,000 or less. The general rule is that if you owe $50,000 or less, you can take the amount due and divide it by 72 (72 months = 6 years). So if you owe $36,000, you could divide that by 72, the IRS will usually accept a payment of $500 per month if you requested it ($36,000 / 72 = $500.00). It can be that simple. Please note that the balance for ALL years has to be $50,000 or less, not EACH year. Note too, that a 72 month IRS Payment Plan will actually drag out past 72 months. The reason is that the simple calculation that they use (and you can too) does NOT include interest and penalties that continue to accrue. So it will actually take some time longer to pay the balance with the continued interest and such. Please read the entire page, however, to keep you from falling into some very troublesome pitfalls.
So, the general rule is if you have a balance due for this year, or even the last couple years, and the total due is $50,000 or less, you can take that amount that is currently due, divided it by 72, call the IRS on your own, and after a long hold time, offer the newly calculated payment amount and they will most likely accept it. This is actually a very good deal and is an inexpensive way of fixing your tax problem without having to pay a professional.