Can’t Pay Your Taxes? A Payment Plan May Be The Answer

Every year, many taxpayers find themselves in a variety of difficult situations rendering them unable to pay their full income tax bill.  In such cases, the IRS would prefer to work with taxpayers using a payment plan than have to pursue collection measures. Although these payment plans are fairly common, it is important to have a basic understanding of what is involved in applying for an installment agreement.

IRS Installment Agreements can vary depending on the situation, but the straightforward ones are easily submitted using the Online Payment Agreement Application on their website. All payment plans come with a cost, ranging from $89-$225 as of January 1, 2019, and the IRS also offers special rates for low-income taxpayers.  To be eligible, taxpayers must be filing compliant before the IRS will consider a monthly payment plan, and payments must be made on time to maintain the agreement.

There are many situations where enlisting the help of a trusted tax professional is needed to help negotiate a beneficial agreement. Such cases can include:

• The IRS bullying a taxpayer into an unreasonable payment plan. A tax professional can help negotiate a long-term payment plan based on available resources.
• The IRS threatening to levy wages, bank accounts, and other assets. A tax expert can advocate for a taxpayer’s financial hardship, file an appeal by the appropriate deadline, and secure a Levy Release.
• In some cases, if the financial condition warrants, an account can be placed in a “not currently collectible” status. Under this program, the IRS withholds all collection activity until the taxpayer is financially able to commit to a payment plan or have an Offer in Compromise submitted.

If any of these situations apply, a taxpayer should prudently consult with a tax professional to achieve a favorable agreement and not fall further behind.