The Internal Revenue Service will allow you set up what is known as an IRS payment plan to repay your tax debt over time. This is also called an installment agreement. An installment agreement can be used for most types of taxes including income tax, payroll tax, and all types of business taxes. However the standards for an installment agreement repayment plan in which the amount of your monthly payment is determined, can widely vary.
First thing. Get current.
If you owe back taxes you must first be sure that all of your tax returns are current. It is important to include the current year in case you owe any taxes for the present year. Generally the installment agreement you negotiate will be accepted by the IRS and it will put your account in good standing. This process will generally prevent IRS collection efforts such as garnishments or levies. The amount you can pay back to the IRS is determined by using a collection statement known as form 433. It resembles a credit application that you might complete for a bank loan. You can avoid this type of paper work if the taxes involved are from a currently filed tax return (1040) and you are offering to pay the taxes over a 12 to 24 month period. This request can be attached to the current year filing. The installment agreement payment must be a direct debit payment so you will need to give the IRS your bank info. You will then receive an acknowledgement as to your installment agreement request.
You might qualify for the IRS Fresh Start Program
If you've owed back taxes for more than one year, the process can sometimes be daunting. If the IRS has been chasing you for years, you will likely have been levied and or garnished. Getting the IRS to back off the collection efforts first requires filing all delinquent returns. Then the fun begins with various collection forms and installment agreement requests. Depending upon the amount of taxes you owe, the process can be streamlined or drawn out. Recently, the IRS has begun a campaign to help tax payers in need. The campaign is called the FRESH START INITIATIVE. It allows a quick and easy request process to obtain the installment agreement. Sadly, many taxpayers won’t qualify for this streamline application process for various reasons including owing over $50,000 of income tax.
The good news is that generally all taxpayers can eventually be approved for an installment agreement if they have never had this happen before; owing taxes. The IRS installment agreement is not granted to taxpayers that are chronic offenders. The IRS will take other collection avenues to get their money such as garnishments and or levies. However the IRS has a heart and will bend over backwards to get you back into the system and in good standing. So never say never.
The total amount of tax that will be repaid and the time period over which the payments are spread widely varies. If you have financial hardship, the IRS may decide to put your debt aside in a classification known as “non-collectible”. Generally tax debts carry a ten year statute of time for the debt to be collected. In recent legislation, certain government debts carry an even longer time period for which the government can pursue their money.
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