Installment Agreements

You may wonder how long an IRS installment agreement lasts, and if you can pay off an IRS installment agreement early. If you owe $50,000 or less, you can get an installment agreement plan for 72 months. In some cases, plans can last up to 84 months, and there is no penalty to pay the tax debt off early.

Setting up an installment agreement with the IRS won’t affect your credit, as the IRS doesn’t report payment arrangements it sets up with taxpayers to the credit bureaus.

But, that’s still debt that must be accounted for. You may ask, “Can I buy a house if I owe the IRS?” While the answer is YES, you can buy a house if you’re in an installment agreement with the IRS, you’ll still need to qualify with the lender by showing you’re paying the tax debt on time and have been doing so for at least three months in most cases.

IRS installment agreement payments come in a couple of different forms. One is a short-term payment agreement. The other is called an individual installment agreement.

A Short-term payment agreement or payment extension is for cases when your IRS debt is $10,000 or less and you’re able to fully pay the tax debt in 120 days or less.

Typically, there isn’t a minimum monthly payment. You’ll just want to pay the debt off as quickly as possible to avoid rising interest rates and fees.

With an individual installment agreement with the IRS, your IRS tax debt is under $50,000, and can’t pay the amount in full in less than 120 days. In these cases, you’ll probably be set up with a “streamlined installment plan” for 72 months. So you can divide your total balance by 72 for a rough estimate of your minimum monthly payment for an IRS installment plan that will resolve your tax debt. 

Also note, if you owe the IRS over $25,000 but under $50,000, you’ll be required to document your income and expenses to the IRS before you’re approved for a payment plan. Alleviate Tax can help you calculate what your monthly payment will be to the IRS so you have an idea going into the process of what to expect.

Maybe you’re considering adding to an IRS installment agreement. Is this even a possibility?

If you’re already set up on an IRS installment agreement and owe taxes again the following year, you ARE allowed to add the new owed taxes to your existing agreement. But you won’t have two separate installment agreements with the IRS.

The IRS installment agreement interest rate is half what the penalty interest rate charged for not paying your tax bill is. When you set up an installment agreement with the IRS, you’ll only be charged 0.25% interest during the installment agreement, compared with 0.5% penalty interest for not paying. Alleviate Tax can help you avoid extra interest charges by assisting with your IRS payment plan agreement.

You are allowed to change an approved installment agreement with the IRS. You’ll need to submit a request to modify or terminate your IRS installment agreement either online or over the phone. If you’re unsure what the right step is, Alleviate Tax can help you get a better idea of what to expect.

If you default on your IRS installment agreement, the IRS will mail you a Notice of Intent to Terminate Your Installment Agreement after only one month of missed payments.

After receiving a Notice to Terminate, you’ll have 60 days to file an appeal with the IRS, during which time the IRS won’t take any action against you.  If you’ve received this notice, it’s a good idea to get help from a seasoned tax team, like ours here at Alleviate Tax.

Typically, the process of getting an IRS installment agreement approved takes six weeks for the IRS to make a decision and get you started with payments.

Fees to apply for an IRS installment agreement range from $31 to $225, depending on whether or not you use the online payment application, your payment method, and which installment agreement you’re applying for. When you work with Alleviate Tax, the application fees are included in our pricing.

Generally, the IRS has a limit of ten years to collect back taxes, known as the “ten-year statute of limitations.” The start of the ten years is the date the taxes were assessed. Mostly, the IRS can’t continue collection efforts after the ten-year statute of limitations.

Have you moved a lot or haven’t received mail for some reason and don’t know if the IRS has sent delinquent tax notices to you? You’re able to check if you owe the IRS and if your taxes are delinquent by accessing your federal tax account on the IRS’s website at IRS.gov/account. There, you can find any amounts owed, balance details, payment history, and view transcript notes on your account.

In most cases, the IRS won’t put you in jail for owing back taxes. Actually, “back taxes” is fairly common. 2018 data shows that 14 million Americans owed back taxes totaling an astounding $131 billion! The IRS certainly didn’t throw 14 million Americans in jail that year.

But let’s be clear, there are some important distinctions about what constitutes “back taxes.” 

You could simply be behind on paying for your quarterly tax filings and would technically owe “back tax.” But the IRS doesn’t pursue legal action on these sorts of cases. The IRS only takes legal action against blatant tax fraud cases and must prove guilt through an extensive auditing process.

The IRS has to prove you intentionally tried to avoid paying taxes you knew were fairly your responsibility. Examples could include claiming non-existent dependents or deductions that aren’t yours to claim. Double-claiming children by divorced parents is another common way people try to defraud the IRS.

You should file any delinquent IRS tax returns for numerous financially beneficial reasons as soon as you can. One of the main reasons is that if the IRS identifies you have an unfiled prior year return, they can seize your tax refund and hold it until you file your return. If you need help filing past-due tax returns, Alleviate Tax has delinquent tax specialists ready to assist you.

How far back can I get a refund on a late-filed return?

Technically, you’re allowed to file back taxes at any time with the IRS. That said, filing over six years past the due date can cause serious problems with the IRS, so avoid waiting that long.

If you attempt to simply ignore the IRS and not file your tax returns, the IRS may file one for you called a “substitute for return” or “SFR.” The biggest downside to this is that only your income is accounted for––no deductions or credits, plus there is a penalty for filing late.

The good news is that you can file your tax return after the IRS files an SFR. You’ll have to send them to a specific place, though, and you’ll need to request a collection hold on your account to allow processing time. Alleviate Tax has SFR experts on staff who can help you file a more fair return.

The Fresh Start Program benefits are far-reaching, so the most important first step to getting tax resolution help is getting any delinquent tax returns filed immediately. The number one thing that will get you into a better position with the IRS is having all of your tax returns filed. 

If you’re struggling to figure out how to file your delinquent tax returns, Alleviate Tax is here to help! This is the most important yet easiest step to take, so contact one of our tax specialists and start getting your taxes back on track today!

If you are unable to pay your tax bill, the good news is the IRS is usually willing to work with you as long as you can prove your financial inability to pay the amount in-full. After all, they’d rather get something versus nothing, and the best way for that to happen is if they find common ground that’s financially feasible for you.If the IRS is threatening to levy and seize your assets, Alleviate Tax may be able to stop the process by negotiating to get an installment plan approved and get you back in compliance with the IRS.Some taxpayers exhibit incredibly dire circumstances that may make it impossible to pay off their tax debt entirely. In these situations, Alleviate Tax can help determine the maximum relief available, which sometimes includes settling for a fraction of the demanded amount.