Common Mistakes Taxpayers Make When Setting Up IRS Installment Agreements
Among the most common solutions for dealing with tax debt, IRS installment agreements help taxpayers handle ongoing obligations little by little.
The process for setting up these agreements may seem easy at first glance; either apply online or complete the short and succinct Form 9465. Still, opportunities for errors abound. Be sure to avoid these common mistakes as you set up your IRS installment plan:
Requesting Installment Levels That Are Too High Or Too Low
Due diligence is essential as you choose a payment level for your application. Quote a number that’s too low, and you may be surprised by how much you’re forced to pay in interest or fees. If you’re too ambitious, however, you may struggle to keep up with payments, thereby placing the entire agreement at risk.
Not selecting a payment amount is also a poor strategy. In this situation, the IRS will calculate your payments on your behalf, based on the financial information submitted. You might not be happy with the result.
Forgetting About Direct Deposit
The IRS installment system comes with the convenient option of paying tax debt via direct deposit. While this approach is not ideal for everybody, it can make the process of applying for an installment plan a lot more affordable. Additionally, direct deposit limits the likelihood of forgetting to make installments and accidentally defaulting on your plan.
Neglect Part II on IRS Form 9465
If you apply for an installment plan via IRS Form 9465, you may need to submit additional information for the document’s part II. This section applies to taxpayers who owe more than $25,000 or have recently defaulted on previous installment agreements. Be prepared to submit detailed information about everything from health insurance to court-ordered payments.
Your best bet for avoiding the mistakes highlighted above? Working with a tax expert as you set up your installment plan. The Highland Tax Group can help you avoid key errors, so reach out today to get started.