Here's What You Need to Remember: Taxpayers who owe less than $10,000 are generally automatically approved as "guaranteed" for an installment payment, but for balances above that amount, individuals may be required to provide additional information to qualify.
A fear among many is that there are "serious" consequences if they can't pay their taxes. There are many reasons why people can't pay their taxes – from job loss to not paying enough estimated taxes to premature retirement plan distributions.
This can be stressful as the Internal Revenue Service (IRS) warns, "Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action."
However, the IRS doesn't actually want to take your house or your possessions over a few thousand dollars. The truth is that the IRS has many options for those who owe money and don't have it to pay, including payment plans.
The most widely used method of paying an old IRS debt is actually a monthly installment agreement (IA). If the tax bill is less than $50,000, most people are given the option to pay the debt over the course of seventy-two months. For those who own more than $50,000, the IRS will negotiate a plan.
Taxpayers who owe less than $10,000 are generally automatically approved as "guaranteed" for an installment payment, but for balances above that amount, individuals may be required to provide additional information to qualify.
Depending on the debt, the IRS will even work with taxpayers, who are given the option to determine how much they can pay every month. If the amount is too low or the taxpayer can't decide, the IRS will determine the minimum payment by dividing by seventy-two. It is also possible to pay down the debt faster. For those who are able to pay off the balance within 120 days, there is no additional cost. For those who require more than 120 days, there could be fees ranging in cost.
An installment plan also allows individuals to pay off the taxes over time and avoid garnishments, levies, or other collection actions. Additionally, taxpayers must be current on their tax returns, and those who haven't filed all past-due tax returns will not be eligible for an IA.
There are also options to reduce the debt owed for those who qualify for Low-Income Taxpayer Status. Some individuals may be eligible for a waiver or reimbursement of the user fee.
The IRS website noted, "Waiver or reimbursement of the user fees only applies to individual taxpayers with adjusted gross income, as determined for the most recent year for which such information is available, at or below 250% of the applicable federal poverty level (low-income taxpayers) that enter into long-term payment plans (installment agreements) on or after April 10, 2018. If you are a low-income taxpayer, the user fee is waived if you agree to make electronic debit payments by entering into a Direct Debit Installment Agreement (DDIA). If you are a low-income taxpayer but are unable to make electronic debit payments by entering into a DDIA, you will be reimbursed the user fee upon the completion of the installment agreement."
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers, and websites. He regularly writes about military small arms and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com. This article first appeared earlier this year.