When trying to set up a payment plan with the IRS (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 IRS Installment Plan / 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! They allow you 6 years to pay off the debt (if you otherwise qualify). They only apply if you owe $50,000 or less.
IRS Installment Plan – The General Rule
- 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 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.
If you don’t qualify for a Streamlined Installment Agreement, then what? The good news is that you can still set up a payment plan, but it’s a much tougher process and the IRS forms are designed to take every available penny other than the bare minimum you need to survive. And I do mean survive. You can’t have an expensive car, nor live in a nice house, or even eat great healthy food. Kiss Whole Foods goodbye!
At Advanced Tax Solutions, CPA, PC, we study the IRS rules and take a proactive approach to get our clients the best solution that’s available. If you need help getting along with the IRS we would be happy to help you. What makes us different than all the 800 number chains out there? We are truly local. Give us a call and set up an appointment to get this behind you as soon as you can!