What Payment Plans Does the IRS Offer?
Dealing with tax debts can be a stressful experience, but fortunately, the Internal Revenue Service (IRS) offers several payment plans to help taxpayers manage their outstanding tax liabilities. These payment plans are designed to provide individuals and businesses with flexible options to pay their taxes in a manner that suits their financial situation. Here are some commonly used payment plans offered by the IRS:
1. Installment Agreement:
The installment agreement is the most common payment plan offered by the IRS. It allows taxpayers to make monthly payments towards their tax debt over an extended period. The terms and conditions of the agreement vary depending on individual circumstances, but it typically requires timely payments and full compliance with future tax obligations.
2. Partial Payment Installment Agreement (PPIA):
For taxpayers who are unable to pay their entire tax debt, the PPIA allows them to make smaller monthly payments over a longer period. This plan takes into account the taxpayer’s ability to pay, as well as their assets and income.
3. Offer in Compromise (OIC):
The OIC is a payment plan that allows taxpayers to settle their tax debt for less than the full amount owed. To qualify for an OIC, taxpayers must demonstrate an inability to pay the full amount or prove that paying the full amount would cause significant financial hardship.
4. Currently Not Collectible (CNC) Status:
If a taxpayer is unable to pay their tax debt due to financial hardship, the IRS may temporarily suspend collection activities and place the account in CNC status. While the debt remains unpaid, the IRS does not actively pursue collection efforts. However, interest and penalties may continue to accrue.
5. Fresh Start Initiative:
The Fresh Start Initiative provides additional flexibility for taxpayers who owe less than $50,000 in tax debt. It offers streamlined installment agreements and relaxed lien filing requirements, making it easier for individuals and small businesses to resolve their tax debts.
6. In-Business Trust Fund Express Installment Agreement (IBTF-Express):
This payment plan is designed for businesses with outstanding employment tax liabilities. It allows eligible taxpayers to pay off their tax debt over a shorter period, typically 24 months, while still remaining in business.
7. Online Payment Agreement (OPA):
The OPA is a convenient option for individuals who owe $50,000 or less in combined tax, penalties, and interest. Taxpayers can apply for an installment agreement online and receive immediate notification of approval.
8. Long-Term Payment Plan:
For taxpayers who are unable to pay their tax debt within the standard installment agreement timeframe, the long-term payment plan provides an extended period for repayment, usually up to six years.
1. Can I negotiate with the IRS to lower my tax debt?
Yes, the IRS offers the Offer in Compromise program, which allows eligible taxpayers to settle their tax debt for less than the full amount owed.
2. What happens if I can’t pay my tax debt in full?
You can apply for an installment agreement or other payment plans offered by the IRS to make monthly payments over time.
3. Can I make payments online?
Yes, the IRS offers an online payment agreement option for individuals who owe $50,000 or less in combined tax, penalties, and interest.
4. Will interest and penalties continue to accrue while I’m on a payment plan?
Yes, interest and penalties will continue to accrue until the full tax debt is paid off.
5. How long does it take to get approved for an installment agreement?
The approval time for an installment agreement can vary, but the IRS typically responds within 30 days of receiving your application.
6. Can I modify or change my payment plan once it’s established?
Yes, you can modify or change your payment plan if your financial situation changes. However, you will need to contact the IRS to discuss your options.
7. What happens if I miss a payment?
If you miss a payment, the IRS may consider your agreement in default and take collection actions. It’s important to contact the IRS immediately if you’re unable to make a payment.
8. Can I use a payment plan for all types of tax debts?
Yes, payment plans can be used for various types of tax debts, including individual income tax, business taxes, and employment taxes.