Agreeing to an Installment Plan
For a lot of taxpayers, it can be a real financial burden to have to pay thousands of dollars in tax all at once. Fortunately, there are some ways around this, and you have the opportunity to see up an installment plan after filing returns. With an installment plan, you make an agreement with the IRS to pay a portion of your taxes each month. If the IRS accepts your request to pay by an installment plan, you will be charged a $105 fee to establish this agreement. If you choose to pay electronically, you can save half of this fee.
If you want to request to pay your taxes in an installment, then you need to fill out IRS form 9465. You can choose to download this form yourself if you are doing your taxes on paper, but you can also access it through some of the popular tax software out there. For example, with Turbo Tax, you can indicate that you want to pay in installments, and then it will guide you through the form that you need to fill out to request an installment plan from the IRS.
Consider Your Options
Before you agree to an installment plan, then you're going to need to consider your options carefully. Although you might think it more prudent to set up an installment plan, it may actually work out better for you if you can pay your taxes at one time. If you do this, then you're not going to have to deal with any fees. If it really is not possible for you to pay for all of this at once, then the installment option may be the best idea for you.
One thing that you need to be aware of is that it does cost a fee to set up an installment agreement. As noted before, this fee can be significantly reduced if you agree to have it electronically transferred from your bank account. If you are earn an income which falls beneath the poverty line, then you may be eligible to pay an even more reduced fee for your installment agreement. Look into what your options are for this agreement payment before you end up selecting something. You may be able to save a great deal by changing the way that you pay.
Setting Up Your Agreement
When you are going to set up your installment agreement, you need to think about how much it is that you owe. If you owe less than $25,000, then you are going to have to follow a different application than those who owe more than $25,000. You can find out what you need to do by calling the IRS or completing a form and mailing it to them. As long as you don't have any back taxes that you have defaulted on, there is a good chance that you can set up an installment plan that will work for you.
Before agreeing to an installment plan, you need to make sure that you can actually make the payments on it. If you cannot make a payment and you miss it, then this could cause your agreement to go into default. This could have a really negative effect on your credit score, so you will want to avoid it if at all possible. If you think that you will not be able to make a payment to the IRS, then you need to contact them as soon as you can. You may be able to make other arrangements and avoid fees.
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