Despite the IRS being slammed right now due to the pandemic, millions of Americans still owe back taxes for previous years. And they are increasingly finding themselves unable to pay up all at once. An installment agreement is just one of many tax relief options that may help you settle with the IRS or lower your amount owed.
COVID-19’s impact on collections
The current pandemic has forced many businesses to shut down or modify how they do business —including the IRS. Not only is the agency busy processing their usual tax returns, it’s also tasked with processing the stimulus payments for millions of Americans. To top it all off, the IRS is scrambling to adjust to the new filing deadline (July 15, 2020), while a large portion of its workforce is working from home, making things slower than usual.
As a result, the IRS announced its “People First Initiative”, taking unprecedented actions to ease the burden on Americans facing tax issues. These new changes range from postponing certain payments related to installment agreements and Offers in Compromise, to limiting certain enforcement actions.
When the bill comes due
Despite their immediate actions, the IRS will soon flip the enforcement switch back on. Come July 15th, a lot of people who made higher income in 2019 will likely owe back taxes. Failure to pay your tax bill immediately may result in penalties and interest on the balance due after July 15th. If you find yourself unable to pay in full, an installment agreement may help you settle your tax burden over a period of time.
How installment agreements work
The IRS divides their installment plans by taxpayers who owe more than $50,000 and less than $50,000:
Taxpayers owing less than $50,000 may request an installment agreement via the IRS website, by mailing Form 9465-FS Installment Agreement Request or by phone at (800) 829-1040. You’ll need to provide your Social Security number, date of birth, caller ID from your recent IRS notice, PIN number or AGI, bank address, employer address and the proposed monthly payment amount.
Taxpayers owing more than $50,000 may request an installment agreement by filling out form 433-F Collection Information Statement. This form requires information regarding your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount and proposed monthly payment.
Installment agreements require a minimum monthly payment of $25, and can vary from 120 days to 60 months, depending on your ability to repay. Installment agreements that take more than 120 days also require a set-up fee. You may be eligible for a decreased fee if you meet their low income guidelines. Also note that the IRS charges a reinstatement fee if you don’t pay your bill and your agreement goes into default.
Help is a call away
At Magone & Company, we can help you navigate the IRS maze and help ensure that you’re on the right payment plan. Don’t hesitate to reach out at (973) 301-2300 to schedule a no-obligation, confidential consultation to explain your options to permanently resolve your tax issue.