If you owe taxes to the Internal Revenue Service (IRS), there are options available to help you pay off your debt. One option is to enter into an installment agreement with the IRS. The installment agreement allows you to pay off your debt over time, rather than in one lump sum. However, it’s important to understand the terms of the agreement and the consequences of non-payment.
What is a balance owed IRS installment agreement?
An installment agreement is a payment plan that allows taxpayers to pay off their tax debt over time. It is an agreement between the taxpayer and the IRS that outlines the terms of the payment plan. When you enter into an installment agreement, you agree to make monthly payments to the IRS until your tax debt is paid in full.
To qualify for an installment agreement, you must meet certain criteria, including the amount of tax debt you owe and your current financial situation. The IRS will review your financial information to determine the amount of your monthly payments.
What are the consequences of not making payments on an installment agreement?
If you fail to make your monthly payments on an installment agreement, the IRS can take enforcement action against you. This can include garnishing your wages, seizing your assets, and filing a lien against your property.
In addition, the IRS can charge interest and penalties on the unpaid balance. The interest rate is typically set at the federal short-term rate plus 3%. The penalties can be up to 0.5% per month on the unpaid balance.
How can I avoid defaulting on my installment agreement?
To avoid defaulting on your installment agreement, it’s important to make your monthly payments on time and in full. If you’re having financial difficulties, you can contact the IRS to request a payment plan modification. This may include changing the amount of your monthly payments or adjusting the due date.
It’s also important to file your tax returns on time and to pay any taxes owed for the current year. Failure to do so can result in defaulting on your installment agreement.
In conclusion, an installment agreement can be a helpful option for taxpayers who owe money to the IRS. However, it’s important to understand the terms of the agreement and to make your payments on time. If you’re having financial difficulties, contact the IRS to discuss your options.