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Do I Have to Pay the Entire Amount of My Tax Debt at One Time? IRS Installment Agreements

The 2018 tax season has left you with an enormous tax liability. The debt is so big that you cannot possibly pay it all at once and afford to take care of your family. Let’s face it; there are not many people that have that type of cash lying around. What can you do? Fortunately, the IRS does allow installment agreements so taxpayers can pay their debts over time.

An installment agreement is a payment plan with the IRS to pay your tax debt within an extended timeframe. It allows you to make monthly payments until your tax liability is paid in full. However, an installment agreement will not stop the accrual of interest and penalties on your tax debt. Interest and penalties are added to the amount you owe until the balance is paid in full.

Moreover, the IRS does charge user fees to set up an installment agreement. The user fee depends upon the term of the agreement and whether the agreement is established online or over the phone. For example, if you plan to need a long term payment plan (paying in more than 120 days), and you make the payments through automatic withdrawals (bank draft), then your fee is $31 if you establish the agreement online and $107 if you establish it via phone.

Some taxpayers may qualify for a reduced or a waiver of the user fee. Waiver or reduction of the user fee applies to those taxpayers with an adjusted gross income at or below 250% of the federal poverty level. If you believe that you meet the requirements for low income taxpayer status, you will need to apply for the reduction or waiver of the user fee. The application should be submitted to the IRS within 10 days from the date of your installment agreement acceptance letter.

Keep in mind that you also must be eligible for a payment plan. To be eligible, you must be in full compliance (meaning all tax returns filed) with the IRS. To check you eligibility or to receive more information, please feel free to contact our office.

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