Receiving a huge tax bill in the mail is never fun, but it doesn’t have to debilitate your finances.
If you can’t pay the entire amount, the IRS offers payment plans — also called installment agreements — in which you can make smaller, more affordable payments each month until the debt is paid off.
There are different types of payment plans depending on how much debt you have and how quickly you can pay it off:
- Guaranteed Installment Agreement. The easiest plan to qualify for, the Guaranteed Installment Agreement is for people with tax bills totaling $10,000 or less. It does come with some conditions, like paying the amount off in three years or less and only using one IRS payment plan over a span of five years. You must also have filed and paid your tax returns on time for the past five years.
- Streamlined Installment Agreement. If your debt is less than $50,000, you could qualify for this payment plan, which is similar to the Guaranteed Installment Agreement but allows you to pay off the debt in six years or less. This is also known as the IRS Fresh Start Program.
If you owe more than $50,000, you will need to provide the IRS with a financial statement, and it may be more difficult to qualify for a payment plan.
- Partial Payment Installment Agreement. If you can’t afford to pay your entire debt, you may be able to make payments on part of it, although this plan is notoriously difficult to qualify for. Unfortunately, the debt will take longer to pay off and the IRS will file a federal tax lien on your property to ensure you pay it.
With any of these agreements, you’ll have to make all of your monthly payments on time, and any tax refunds you’re eligible to receive will be automatically applied to your overall debt.
If you’re stuck with a hefty tax bill, let a trusted tax professional help.
Schedule a free consultation with one of our tax associates and see how we can help you leave your debt behind.