What is an IRS Installment Agreement? How Much Do You Have to Pay Per Month? What If You Can’t Pay?

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You have filled out your taxes and filed your IRS forms. There’s only one minor catch – you can’t afford to pay. The government might agree to an IRS installment plan so that you will not be subject to further collection actions. The minimum amount of monthly payments varies, depending on how much you owe. However, you will need to pay interest and penalties.

Charges for Plan Set Up

The IRS gives you 120 days to pay off your bill before the agency charges you a fee. While the standard fee is $105, the IRS drops that amount to $52 for direct debit plans. If you fall under the minimum threshold, it reduces the fee to $43.

Working Out a Fair Payment

The IRS provides you with some flexibility when setting up your payment plan. Again, remember that you need to pay interest and penalties on the balance, so the more that you pay each month, the sooner you will pay off your debt. If you choose an amount that the IRS believes is too low, it will assign you a payment, which is how much you owe divided by 72.

Balances under $10,000

The IRS grants automatic approval for plans under $10,000. You must pay off the balance within 36 months, but you do not need to pay a minimum monthly amount.

Balances Ranging from $10,000 to $25,000

For an agreement to pay off debts in this range, the IRS offers a streamlined plan. It does not guarantee acceptance, but it usually will allow you six years to pay. You will need to make minimum payments equal to how much you owe divided by 72.

Balances Ranging from $25,000 to $50,000

If you owe a balance of more than $25,000, you will need to mail in IRS Form 9465-FS, which details your earnings and other debts. Again, you will need to make minimum payments equal to how much you owe divided by 72.

Balances over $50,000

If you owe more than $50,000, the IRS will examine your finances carefully, including bank accounts, assets, income and investments. The IRS evaluates these cases individually, so it will work out a payment plan with you.

Currently Not Collectible (CNC)

The IRS might opt to put your case in currently not collectible status. As the name indicates, the agency suspends all collection action on your account. However, this is a temporary solution; interest and penalties continue to mount during this deferment. Work with your tax professional to look at other alternatives.

Offer-in-Compromise

An offer-in-compromise through the IRS is a settlement plan for less than what you owe. The IRS considers numerous factors, including

  • Earnings
  • Expenses
  • Ability to pay and
  • Property and assets.

You can pre-qualify for an OIC online through the IRS website.

Let Us Assist You with Developing a Strategy to Handle Your IRS Debt

Navigating the different payment plans to find the one that is best for you takes some skill. Call us at 720-398-6088 for professional insight into the best option for you.