Whether you call it an installment agreement, payment agreement, payment option or a payment plan, the idea is the same - you make payments on the tax you owe. That sounds like a good deal, but you can save money by paying the full amount you owe as quickly as possible to minimize the interest and penalties you'll be charged. For those who cannot resolve their tax debt immediately, however, an installment agreement can be a reasonable payment option. Installment agreements allow for the full payment of the tax debt in smaller, more manageable amounts.
This agreement allow you to pay your full debt in smaller, more manageable amounts. Installment agreements generally require equal monthly payments. The amount of your installment payments and the number you make will be based on the amount you owe and your ability to pay that amount within the time we can legally collect payment from you.
You should be aware, however, that an installment agreement is more costly than paying all the taxes you owe now. As with most revolving credit arrangements, the IRS charges interest and penalties on the unpaid portion of the debt.
Another cost associated with an installment agreement is a user fee. This is a one-time fee (currently $52 for direct debit agreements and $105 for non-direct debit agreements) we charge to set up the agreement. For eligible low-income individuals, the fee for entering new agreements will remain $43. If you don't meet the terms of the agreement throughout the life of the agreement, the IRS will charge an additional fee of $45, regardless of income level, to reinstate it.
If you want to pay off your tax debt through an installment agreement, we will contact the IRS on your behalf. There are two general categories of Installment Agreements:
* $25,000 or less in tax, the IRS will tell us what you need to do to set up the agreement.
* More than $25,000, the IRS may still be able to set up an installment agreement for you, but may also ask for
financial information to help them determine your ability to pay.
Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government's interest until you make your final payment.
Note: The IRS can't take any collection actions affecting your property while it considers a request for an installment agreement, while your agreement is in effect, for 30 days after the IRS rejects your request for an agreement, or for any period while you appeal the rejection.
If you arrange for an installment agreement, you can pay with:
* Personal or business checks, money orders, or certified funds (all made payable to the U.S. Treasury)
* Payroll deductions your employer takes from your salary and regularly sends to IRS
* Electronic transfers from your bank account or other similar means
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