If an outstanding income tax balance remains unpaid for long enough, it becomes subject to IRS collection activities. At some point in the process, an individual who owes the IRS could experience some type of enforcement action. For individuals unable to pay their tax balance in full, the IRS offers an installment payment arrangement.
The prospect of receiving a wage garnishment or a bank levy provides strong incentive for an individual to make arrangements to settle a tax balance. Once you apply for an installment agreement, the IRS generally refrains from taking further enforcement actions. The steps required to request an installment agreement depend on how soon you can pay and the amount of your unpaid tax balance.
Payment within 120 days
The most straightforward payment arrangement is available if you can pay in full within 120 days. You may apply for this short-term agreement if you owe less than $100,000. There is no fee to set up a short-term agreement, but interest and late penalties are typically added to the balance. For tax balances requiring more than 120 days to pay, longer terms may be approved if your balance is within specified thresholds.
Balance of $50,000 or less
If you owe $50,000 or less in total, the IRS provides an online application process to request an installment agreement. The maximum length of the installment agreement is 72 months. It is crucial to understand the compliance requirements of an installment agreement.
To gain approval of an installment agreement application, you must be current on all other federal income taxes. If approval is received, you must remain current on subsequent filing and payment requirements. The failure to meet the terms of the agreement might result in a return of collection activity, so it is essential to agree to realistic terms that can be met.
Balance of more than $50,000
If you are ineligible for an online agreement, you may use IRS Form 9465 to apply for a payment arrangement. Along with Form 9465, the IRS is likely to request a financial information statement to justify the terms required to settle a larger balance.
An unpaid tax balance can sometimes be financially overwhelming. If an installment agreement is not a practical solution, the IRS may consider a settlement option referred to as an offer in compromise. If an offer in compromise is approved, your tax balance is reduced to a lesser amount. Contact a tax attorney for more information about the options for resolving tax issues.
To learn more, contact a tax attorney like Dermot F Kennedy.
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