Add tax balance to installment agreement

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Station Overview

Payment plans (also referred to as Installment Agreements) are one of your options if you can’t pay your taxes in full when they’re due. Payment plans allow you to pay your debt over a time. You must be current with monthly payments, timely file your tax returns, and make estimated tax payments to qualify for a payment plan. If your payment plan is accepted, you must also remain current on filing and payment obligations while you are on the payment plan. Future refunds will be applied to unpaid taxes until the tax balance is paid in full.

• Short-term payment plan: The IRS offers additional time (up to 180 days) to pay your balance in full. It’s not a formal payment plan, so there’s no application and no fee, but interest and any applicable penalties continue to accrue until the tax debt is paid in full. You can request a short-term payment plan by phone, mail, in-person, or online.
• Long-term payment plan (Installment Agreement): The IRS offers formal payment plans, also known as installment agreements, when repayment will take more than 180 days. More information about various long-term agreements is listed below under the “what are my next steps” section.

This notice or letter may include additional topics that have not yet been covered here. Please check back frequently for updates.

What does this mean to me?

You have a balance on your tax account and you want to pay the balance within 180 days or via monthly payments to the IRS.

After requesting a payment plan, you may receive notices or letters for the following:

• Rejection of proposed payment plan/installment agreement.
• Confirmation of an accepted payment plan/installment agreement.
• Monthly reminders for payment.

If you are approved for a payment plan and then incur additional balances, fail to make required payments, or fail to file current tax returns, you may receive notices or letter for the following:

• Default of current payment plan/installment agreement.
• Termination of current payment plan/installment agreement.

It is important that you carefully read the letter or notice you received so you can respond accordingly or call the phone number on the notice or letter immediately if you have questions.

How did I get here?

You have a balance on your tax account and you may want to pay your balance through a payment plan, or have an established payment plan. With an approved payment plan, you agree to stay current with all monthly payments, and all tax filing and payment requirements.

Some Common Types of long-term payment plans, known as Installment Agreements (IA):

Guaranteed Installment Agreements

You have the right to an agreement without submitting a financial statement if:

• The amount of tax you owe (not counting interest and penalties) is less than $10,000.
• You (and your spouse, if you filed a joint tax return) have filed and paid all taxes due for the last five years.
• Neither you (nor your spouse, if you filed jointly) have had an installment agreement with the IRS in the previous five years.
• You can pay the full amount you owe within three years.
• You agree to pay the liability before the period for collecting the tax expires.
• You comply with the tax laws during the agreement.

You can apply for a guaranteed installment agreement online, by phone, or by mail.

Streamlined Installment Agreements

There are two types of streamlined installment agreements, depending on how much and what type of tax you owe. For both types, you must pay the debt in full within 72 months (six years), and within the time limit for the IRS to collect the tax, but you won’t need to submit a financial statement.

• Assessed tax liability under $25,000 (include all assessed tax, penalties, and interest in computing the balance owed). This is available to individuals, businesses that are still operating and only owe Form 1120 income tax or Form 1065 late filing penalties, and businesses that have gone out of business that owe any type of tax.
• Tax liability from $25,001 to $50,000 (include all assessed tax, penalties, and interest in computing the balance due). This is available to individuals and out-of-business sole proprietors. This agreement requires payments to be made by direct debit or payroll deduction.

You can apply for a streamlined agreement online, by phone, or by mail.

Partial Pay Agreements

In this situation, you must have some ability to pay your taxes but can’t pay in full within the remaining time the IRS has to collect. The IRS may allow you to make payments until this collection period expires for less than the full amount owed. See Partial Payment Installment Agreement for more information.

Routine/Regular Installment Agreements

If you don’t meet criteria for guaranteed or streamlined IAs, you can still request an installment agreement from the IRS. You can request a routine installment agreement by calling the IRS or by mail, but not online. You will need to agree to pay the liability in full before the period for collecting the tax expires. Installment Agreements allow for additional provisions, when warranted:

• The Six Year Rule: Generally, if you only owe individual income tax, you may qualify for the Six Year Rule. You’d need to provide financial information but not proof of reasonable expenses. You must stay current with all filing and payment requirements, including projected penalties and interest on the tax debt, and fully pay the balance due in six years (72 months) and within the collection statute — the time the IRS has to collect the amount you owe.
• The One Year Rule: If you can’t pay your debt in full within six years, you may be given up to one year to modify or eliminate excessive necessary expenses. By modifying or eliminating these expenses, you may be able to pay the liability, plus accrued interest and penalties, within the six-year limit.

In-Business Trust Fund Express Agreement

An in-business trust fund express agreement may be available for businesses that owe up to $25,000. You must pay the debt in full in 24 months or before the statutory period to collect expires, whichever is earlier. You can also pay down the liability to $25,000 or less, and then apply.

You can apply for an in-business trust fund express agreement online, by phone, or by mail.

If none of these options seems to fit your circumstances, you can call the IRS and discuss your situation. Call 800-829-1040 (individual) or 800-829-4933 (business), or the phone number on your bill or notice.

What are my next steps?

Before you consider an installment agreement

Review the tax debt to be sure you owe it. If you don’t believe you owe the tax, now is the time to talk to the IRS about it. If you’ve received an IRS notice, start by calling the number on the notice to discuss the amount you owe.

Once you verify that you owe the balance and before you request a payment plan, you should know:

• The IRS will not consider an installment agreement until you’ve filed all your tax returns.
• Once you’ve entered into an agreement, you’ll have to file and pay all future taxes on-time or your agreement may default. If you default by missing a payment(s), the installment agreement may be terminated, and the IRS may begin taking enforcement action. It’s important to select the agreement that meets your personal situation and allows you to make your payments every month and on time. A common source of tax debt is not having enough money withheld. If this is happening to you, consider revising your IRS Form W-4, Employee’s Withholding Allowance Certificate, to avoid this problem in future years. If you’re self-employed, make your estimated payments throughout the year.
• If the IRS agrees to an installment agreement, it will still charge applicable penalties and interest until the tax is paid in full or becomes uncollectable. Depending on the type of agreement, and the amount of your income, you may be charged a fee to establish an installment agreement. Fees may be reduced or waived if you are determined to be low-income. If you believe that you meet the requirements for low-income taxpayer status, but the IRS does not identify you as a low-income taxpayer, please review Form 13844: Application for Reduced User Fee for Installment Agreements for guidance. Applicants should submit the form to the IRS at the address below within 30 days from the date of their installment agreement acceptance letter to request the IRS to reconsider their status.

Internal Revenue Service
PO Box 219236, Stop 5050
Kansas City, MO 64121-9236

• If the IRS approves an installment agreement, it will generally keep any tax refunds and apply them to your debt.
• If the IRS agrees to an installment agreement, it may still file a Notice of Federal Tax Lien. For more information, see Publication 594, The IRS Collection Process.
• If you request an installment agreement, the time the request is pending pushes out, or suspends the running of, the initial ten-year collection period. Generally, an installment agreement request is pending until it is reviewed; and is established, or the request is withdrawn by you or rejected by the IRS. If the request for an installment agreement is rejected, the running of the collection period is suspended for an additional 30 days. Similarly, if you default on your installment agreement payments and the IRS proposes to terminate the installment agreement, the running of the collection period is suspended for an additional 30 days. Last, if you exercise your right to appeal either an installment agreement rejection or termination, the running of collection period is suspended from the time the appeal is pending to the date the appealed decision becomes final.
• If the IRS approves an installment agreement, you must make your agreed upon payments on time.
• The IRS may ask you for supporting documents for your income, expenses, and other amounts you owe (for example, home and car loan payments, other obligations). The IRS publishes and uses national and local standards which can be used to determine allowable monthly expenses and arrive at the appropriate monthly payment. If you feel you should be allowed more than the standard amount, provide reasoning with your application.

You may wish to consider other resources before setting up an payment plan. Can you borrow from a financial institution or a family member to pay the balance? If so, it will probably cost you less money since the IRS charges interest and penalties even though you’re on a payment plan. You may also avoid these costs by paying the IRS sooner. Compare the costs for your situation.

How to Apply

Online

The simplest way to get an installment agreement is to use the IRS Online Payment Agreement program. If you meet the criteria. Follow the instructions to see if you qualify. The system will give you an immediate answer. If you don’t qualify for the Online Payment Agreement program, OPA will provide instructions on available alternatives.

By mail

If you can’t or choose not to use the online system, you can complete the IRS Form 9465, Installment Agreement Request, and submit it with all the required documents, and mail it to the address in the instructions.

For a routine installment agreement, you also need to submit another form:

• Individuals: Form 433-F, Collection Information Statement
• Business: Form 433-B, Collection Information Statement for Businesses

By phone

If you prefer to apply by phone, call 800-829-1040 (individual) or 800-829-4933 (business), or the phone number on your bill or notice.

Fees:

• The initial fee for setting up an installment agreement varies depending on the payment method you choose. These fees are subject to change and are listed on the Online Installment Agreement page.
• Low-income taxpayers may be able to have the fee waived at the time of entering into the IA if they choose to pay by direct debit, or if not, they may be able to get the fee reimbursed once they meet the terms of the agreement. If you believe that you meet the requirements for low income taxpayer status, but the IRS did not identify you as a low-income taxpayer, please review Form 13844: Application for Reduced User Fee for Installment Agreements for guidance. Applicants should submit the form to the IRS at the address below within 30 days from the date of their installment agreement acceptance letter to request the IRS to reconsider their status.

Internal Revenue Service
PO Box 219236, Stop 5050
Kansas City, MO 64121-9236