It’s my annual Taxes A to Z series! If you’re wondering whether you can claim home office expenses or whether you can deduct a loss of assets, don’t miss a single letter.
I is for installment agreement.
If you can’t pay your tax bill in full to the Internal Revenue Service (IRS), all is not lost: Options are available. One of these options is a long-term payment plan, also known as an installment agreement.
An installment agreement is an option if you expect it will take more than 120 days (about four months) to pay your tax bill. Depending on how much you owe, you may not even need to speak to a real person because if they are individuals, you can apply for an Installment Agreement if you owe $50,000 or less in combined individual income taxes, penalties, and interest on-line.
For the online application you need:
- Name and address as they appear on your most recently filed tax return
- Date of birth
- Filing status (single, head of household, married filing jointly, married filing separately, or qualifying widower)
- Social Security Number (SSN) or Individual Tax Identification Number (ITIN)
Once you have completed your online application, you will receive an instant notification as to whether your payment plan has been approved.
You can also apply by email using form 9465, Application for payment in installments (downloads as pdf) or by phone (call the number on your bill). These permits may take a little longer.
Remember that it is significant cheaper if you sign up online (fee is only $31) – and even cheaper if you agree to pay by direct debit. But this works well because for individuals, balances over $25,000 must be paid by direct debit (otherwise, you can pay by direct debit, debit card, credit card, check, or money order).
If you cannot afford the application fee and your income is at or below the set level under the Department of Health and Human Services’ poverty guidelines, you will pay a reduced usage fee. If the IRS system identifies you as low-income, the agreement will automatically reflect the reduced usage fee.
You must file all your tax returns before applying. The IRS charges you interest while you pay your bill and may file a federal tax lien until you pay in full (more on liens here). The IRS can also seize your tax refund while you’re in repayment – but you already knew that.
If you owe more than $50,000 or your taxes are anything other than individual income taxes, the rules are slightly different, so check with the IRS. There is a brief caveat: if you are a sole proprietor or independent contractor, apply for a payment plan as an individual.
For your taxes from A to Z, here’s the rest of the series:
For 2018 tax brackets and other figures, see this post.