What You Need to Know About IRS Installment Agreements

June 26, 2020

When you cannot pay your taxes in full, the Internal Revenue Service provides payment plan options. Known as installment agreements, they allow you to pay your taxes in monthly increments. Learn what your Encino tax consultants want you to know about installment agreements before moving forward with a payment plan. 

Guaranteed Installment Agreements & Individual Payment Plans

If you owe the IRS $10,000 in taxes or less, the organization automatically approves an installment plan if you (or you and your spouse) have not filed or paid your taxes late in the last five years. Extensions are exempt from this criteria. You will also receive automatic approval if you agree to pay the taxes in three years, you agree to file and pay all future taxes on time, and you do not have an open bankruptcy case. 

Approval for an individual payment plan requires owing $50,000 or less to the IRS. You can apply for a short or long-term plan where you agree to pay the amount in 120 days or less, or more than 120 days, respectively. 

Payment Plan Fees

Fees for setting up payment plans depend on the type of agreement you make with the IRS. For example, if you agree to pay the amount in more than 120 days with monthly payments, you will pay $31 for an online setup. If you make the arrangements in person or by mail or phone, you will pay $107. These fees concern direct debit payments only. Should you qualify as a low income candidate, the fees are waived. If you make monthly payments using other means such as money orders or checks, you’ll pay fees ranging from $43 to $225 depending on if you qualify for low income and how you set up the payment schedule.

The IRS also typically charges penalties and interest until the balance is paid off, such as dishonored check penalties. 

Payment Plan Revisions

It’s possible to change your payment plan using the IRS Online Payment Agreement Tool. The tool allows you to change the monthly payment due date, change the amount, and convert the agreement. For example, if you’ve been paying by money order and want to switch to direct debit, use the agreement tool to make changes. 

Review your tax options with the Los Angeles accounting experts at Wallace & Associates. These Los Angeles accounts offer an array of tax services to help you stay out of debt.