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At Solvable, we care about your financial well-being and are here to help. Our research, articles and ratings, and assessments are based strict editorial integrity. Our company gets compensated by partners who appear on our website. Here is
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A large number of taxpayers choose an Installment Agreement payment plan to resolve their back taxes. This IRS plan allows you to pay your back taxes in monthly installments. If you cannot pay your full back taxes in a single lump-sum payment but can pay it back monthly, then an Installment Agreement may be the right plan for you.
How Can I Qualify for an Installment Agreement?
There are many types of Installment Agreements the IRS offers. These are:
Guaranteed Installment Agreement
Streamlined Installment Agreement
Partial Payment Installment Agreement
Non-Streamlined Installment Agreement
Each type of Installment Agreement has their own qualifying factors that you need to meet to enter the agreement. Along with these basic requirements, there may be certain other conditions as well.
Guaranteed Installment Agreement – To qualify for a Guaranteed Installment Agreement, your total back taxes amount needs to be $10,000 or less. The total back tax amount is your back taxes due plus penalties and interest.
Streamlined Installment Agreement – To qualify for a Streamlined Installment Agreement, your back taxes need to be up to $25,000 if you are an individual and $50,000 if you are a business.
Online Payment Agreement – If you owe $50,000 or less in back taxes, then you may qualify for an Online Payment Agreement. If you are a business, you may qualify if you owe $25,000 or less.
Partial Payment Installment Agreement – With this plan, you pay only a partial amount of your back taxes due to financial difficulties. The IRS agrees to a partial payment only if you are experiencing financial hardship and cannot afford to pay your full back taxes. To qualify for this plan, negotiations with the IRS may be required.
Non-Streamlined Installment Agreement – This new payment plan was brought into effect in 2020 and has made it easier for those who owe between $50,000 and $250,000 to resolve their back taxes. Previously, the IRS asked for a full and detailed financial disclosure. Now, only a limited financial disclosure is required, and you can also get more time to pay.
How Much Do I Pay Each Month?
When determining how much you can pay each month, the IRS considers your financial capability and the amount of back taxes you owe. You or your tax representative may need to negotiate with the IRS to make them agree with the monthly payments that suit you best.
What about Interest and Penalties?
In an Installment Agreement, because you’ll be paying your back taxes in installments, the IRS charges both interest and penalties each month on the amount you owe.
Penalties – Penalty is charged at 0.5% if you filed your tax return but did not pay your full tax bill. If you did not file your return, then a penalty of 5% is charged. This penalty is charged every month until the return is filed or back taxes are paid.
You may be able to get assistance from certain penalties if you can prove to the IRS that you attempted to file your return or pay your taxes but could not do so due to some sudden occurrence such as a death in the family, sickness, natural disaster, and so forth.
Interest – The IRS charges interest quarterly on the total back tax amount. The interest rate is the federal short-term rate, plus 3%. Moreover, interest compounds daily.
Due to the accruing of penalties and interest, the back taxes amount keeps increasing every day that it remains unpaid. The earlier you enter into a repayment plan, the less you will need to pay in back taxes.
What If I Don’t Qualify for an Installment Agreement?
Along with the Installment Agreement, the IRS has other resolution options, which allow you to resolve your back taxes. If your financial situation is such that you can only pay a part of what you owe, you may consider an Offer in Compromise. If you cannot afford to pay any of your back taxes, you may be able to get the Currently Not Collectible status and avoid a lien or levy.
Whatever your financial situation, you can resolve your back taxes and avoid aggressive IRS collection actions that can adversely affect your credit score.
How Do I Apply for an IRS Installment Agreement?
There are a variety of ways to get an IRS Installment Agreement. You can apply online or through the mail.
Depending upon the time, you take to pay and the amount of back taxes you owe, the plan setup fee differs.
Short-term – If your payment plan is short-term, which means that you will pay back the full back taxes in 120 days or less, then the IRS charges no setup fee. However, interest and penalties will continue to be added to your back taxes until you have paid it in full.
Long-term – The IRS charges a setup fee of $31, if:
Your Installment Agreement is of 120 days or more
You owe more than $25,000
You pay through Direct Debit
If you do not pay through Direct Debit, then the setup fee is $149.
For low-income taxpayers, the setup fee may be lowered to $43 under certain conditions.
In a long-term payment, interest and penalties continue to be added to back taxes.
Should I Hire Help?
Even though obtaining an Installment Agreement may look easy, you can get more benefits if you hire a professional tax service. Regardless of the amount you owe, you may be able to reduce the penalties, and in some cases, the total amount you pay in back taxes. The time duration for payment can also be negotiated.
Terms of an Installment Agreement are not fixed and can be negotiated considering the taxpayer’s particular circumstances. Your tax representative can hold discussions with the IRS to negotiate the terms of the agreement to make them more comfortable for you.=
In cases where you can achieve a reduction in back taxes or need to pay a substantial amount in back taxes, hiring a professional can certainly help.
Tax attorneys and enrolled agents are seasoned professionals who routinely deal with the IRS. They have in-depth knowledge of tax laws and the tax code along with years of experience. Most tax services offer a free consultation that you can use to gain a basic understanding of the service and what they can do for you.
Solvable is a for-profit company that helps customers resolve their tax problems, but a free service for consumers. Partners cannot pay us to guarantee favorable editorial reviews or ratings. We do not publish favorable (or unfavorable) editorial reviews or assessments at the direction of an advertiser or partner. We always work to put consumers first and do our best to provide value in meaningful ways, but our reviews are subjective.
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Solvable is compensated by some of the companies seen on our website. Most often, Solvable receives fees when one of our readers clicks, fills out a form, applies for, or receives a financial product from one of our partners. We also earn fees for capturing consumer stories and writing about them, displaying advertising, having our partners sponsor certain parts of the site, and writing content that may be relevant to our partner and their audience. This compensation may impact where products appear on this site, including article pages, comparison listings, the order in which they appear or if they will even appear on a given page, and our matching recommendations. Solvable has not written about, reviewed, or rated all financial products available to consumers.
In addition, we may be compensated in the following ways:
Referrals to consumers who use the online form or locator line that may provide expert answers to questions;
Marketing tax resolution, tax preparation, tax audit help and general tax assistance.
Referrals to services that help consumers with tax resolution, tax preparation, tax audit help and other tax issues.
We do recommend that you shop around and compare services and costs with other companies while performing your own due diligence, especially since people’s experiences with companies can change over time.
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We are not attorneys and we don’t provide legal advice. As always, we encourage you to do your homework and check out individuals and companies before you hire them. If you are already working with an attorney, we urge you to ask them your questions. After all, they will be familiar with your situation and the laws in your state.
We hope that you find Solvable helpful in your efforts to get a fresh start.
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There is no one-size fits all business loan. Rather there are several types that will likely be offered and or discussed with you upon completing your request. Business Funding Partners determine the underwriting criteria necessary for approval, you should review each Partner’s terms and conditions to determine which business funding option works for your business’s financial situation. All reasonable efforts are made to provide and maintain accurate information. All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each Partner’s discretion. There is never a guarantee your business will be approved for credit or that upon approval your business will qualify for the advertised rates, fees, or terms shown. Lender terms and conditions will apply and all products may not be available in all states. Ask your loan representative for details.
Student Loan Refinancing Advertiser Disclosure
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Potential savings may vary based on the interest rates, balances and remaining repayment term of the loans you are seeking to refinance. Your overall repayment amount may be higher than the loans you are refinancing even if your monthly payments are lower. Variable rate options will fluctuate over the term of your loan with changes in the LIBOR (or other index utilized by the lender) rate, and will vary based on applicable terms and presence of a cosigner. Fixed interest rates may be based on applicable terms and presence of a co-signer. Additional terms and conditions, and rates are subject to change at any time without notice and may not be available in all states or for all types of current student loans. Such changes should only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Lenders are required to provide every potential borrower with disclosure information before they apply for a private student loan. The Lender you select is required to provide you with an Application Disclosure and an Approval Disclosure within the application process before you accept the terms and conditions of your loan. solvable is not a lender or creditor, it does not offer, extend or alter credit terms. Only participating lenders can perform the full application and deliver the required disclosures, please ask your lender about rates, terms, fees, and potential discounts that may be available for each product.
Please Note:
Certain federal and private student loans may not be eligible for consolidation/refinance.
Certain consolidation/refinance plans may result in higher monthly payments or negative consequences (i.e. prepayment penalties).
Consolidation/refinance may lead to other negative results, such as loss of grace periods.
Loans in default generally cannot be consolidated until completion of a repayment trial plan so tell your lender if you are in default and determine relevant options (be wary of those asking for upfront fees as well)
Other options or programs may fit your needs (i.e. personal loan, debt consolidation and/or debt relief). Consult your financial and/or tax advisor prior to making any decisions.
Solvable is not a creditor as it does not offer, extend or alter credit; rather it is an online market lead generator that allows consumers to shop and compare rates, terms and costs associated with financial products such as mortgages, auto loans, personal loans, student loans, etc. solvable does not originate or fund any product it markets; rather it has a network of lenders or Partners/affiliates. You may choose to speak with one or more of these lenders or Partners/affiliates to determine what your actual terms and savings may be. Only a lender can provide you with a formal application for credit, your inquiry form here is merely an expression of interest and/or intent to obtain credit or assistance. You must discuss your actual credit situation and fill out the lender’s required documents prior to obtaining an extension of credit. Network lenders may not have the best or the lowest rates so you are encouraged to continue to shop and compare additional lenders, credit unions, local financial institutions, etc. to ensure you are truly getting your best deal for your situation.
You should contact your tax professional or other financial advisor to determine if you can actually realize savings by refinancing when it can extend the life of your current loan. You should ask the lender about all terms, rates, fees and costs associated with each product and if you will realize a net tangible benefit from the same. All initial estimated savings is done by trying to calculate what your rate may be; however, solvable does not have that information and cannot guarantee potential savings or that lenders will approve you for such product that would warrant those savings. Rates are not guaranteed and change daily. Lenders/Brokers/Dealers/Partners that perform the actual underwriting will have to determine if you meet their underwriting criteria which is unknown to solvable at the time of matching/offer/quote delivery. All amounts are estimates and examples only and do not represent an actual offer.
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