Payment Plans and Installment Agreements
Individual and Business Installment Plans
Some taxpayers may find themselves unable to pay their tax debt to the IRS in full. The IRS does offer payment plans (also referred to as installment agreements) to taxpayers to ensure that they do not default on their debt. Payment plans allow the taxpayer to pay off their debt in monthly payment installments. Setting up such a plan can help reduce or eliminate any penalties or fees for non-payment.
In order to qualify for any plan, all yearly tax filings must be completed. Individuals who owe less than $50,000 and businesses who owe less than $25,000 could set up a payment plan online. Should an individual or business owe more, they can still set up a monthly payment installment by completing a mailing in IRS Form 9465: Installment Agreement Request and IRS Form433-F Collection Information Statement or calling the number on your bill/notice or 800-829-1040.
In-Business Trust Fund Express Installment Agreement
For small businesses with employees, there is an additional option that they may qualify for, an In-Business Trust Fund Express Installment Agreement (IBTF-Express IA). This payment plan does not require financial verification as a consideration for a payment plan. To qualify:
- A business must owe $25,000 or less when applying. If a business initially owes over $25,000, a payment can be made to bring the debt down to the qualifying amount.
- The debt must be able to be paid in full within 24 months or the Collection Statute Expiration date, whichever comes first
- If the amount is between $10,000 and $25,000, it must be enrolled in automatic payments
Small businesses that qualify can apply for an IBTF-Express IA online, by calling the number on their bill/notice or by calling an IRS Business and Specialty Tax representative at 800-829-4933.
Payments and Avoiding Default
There are a few things to know or do with an installment agreement to make sure that a payment plan does not go into default or is voided.
- Any future refunds will be appiled to the balance owed until it is paid in full. This is outside of regular payments.
- Additional payments can be made but to avoid going into default, the minimum amount should always be paid each month.
- Be sure that the name, Social Security Number, address and phone number, tax year and type are all correctly listed on each payment made.
- All future tax returns must be filed and paid on time to keep the agreement valid.
- Keep the address and phone number up to date on your account.
- If a monthly bill does not arrive, the payment is still required and should be sent to the address listed in the installment agreement.
Should an account go into default or is invalidated, there may be a chance to reinstate it. Penalties and interest will continue to accrue on the account until it is paid in full, much like a credit card bill. If a payment cannot be made, it is best to notify the IRS before defaulting.