Installment Agreement

Tax Debt ReliefAn Installment Agreement is a tax payment plan negotiated with the IRS to make monthly payments until your debt is resolved. The amount of money you owe and your monthly income after allowable living expenses determine your tax payment plan.

If you choose a direct debit tax payment plan then the fee is $52. If it is a standard monthly payment or a payroll deduction agreement the fee is $105. The fee for qualified low income taxpayers is $43.

An Installment Agreement is easier to be approved for than an Offer in Compromise . However, this a payment plan is not ideal compared to satisfying your debt fully and saving money by avoiding interest.  Interest still accrues on tax debt while making tax payments under an Installment Agreement. But by making monthly tax payments you can avoid penalties, levies, garnishments and usually tax liens. The IRS has the option to charge late penalties for installments that are not paid by their due date.  Sometimes they will charge you a penalty, sometimes they won’t.

The IRS announced a Fresh Start initiative that they say will help more taxpayers qualify for an OIC or Installment Agreement. [Learn More..]

There are a few ways you may qualify for an installment agreement.

If you owe less than $10K and have not set up an installment agreement with the IRS before you will most likely qualify be guaranteed to qualify for an installment agreement. You must have be current on your taxes for three years without filing or paying late and your debt must be paid off in 36 months or less.  The IRS is required to agree to an installments if you meet these criteria.

However, even if you do not meet all of the criteria to guarantee an Installment Agreement, it is still relatively simple to get approval. 

In March of 2012 the IRS announced a program called the “Fresh Start Initiative.” This initiative allows more taxpayers to qualify for streamlined Installment Agreements. Now taxpayers who owe up to $50K can qualify for an installment agreement. The previous limit was $25K. If you owe more than $50K the IRS will allow you to pay your debt down to $50K and make payments on the remainder of the balance.

There is an additional one-time fee for processing when you choose an installment agreement with the IRS. If you choose a direct debit payment agreement the fee is $52.  If it is a standard monthly payment or a payroll deduction agreement the fee is $105. The fee for qualified low income taxpayers is $43.

Contact an OMG Tax team member and find out if an Installment Agreement is the right path to resolve your IRS tax debt.

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