If you owe money to the IRS, and you can’t afford to pay in full, you may be able to qualify for an IRS payment plan (or installment agreement). Establishing the payment terms is not arbitrary. The IRS has guidelines for determining your minimum monthly payment.
When you request an IRS payment plan, you must calculate your minimum monthly payment based on how much you owe to the IRS. Then, you need to find out the kind of payment plan you will be requesting and the terms and conditions needed for approval.
The IRS tax attorney at Porter Law Office, LLC has in depth experience securing IRS payment plans for taxpayers in Ohio and throughout the United States This article explains what you can expect for your minimum monthly payment under current IRS guidelines.
Contact the Ohio tax lawyer today to discuss your installment agreement options.
IRS Payment Plan Basics
An IRS payment plan is an arrangement where the IRS lets you pay your tax liabilities over time. See I.R.M. 5.14.1.1. There are several types of agreements. For individuals, there are guaranteed, streamlined, routine, and partial payment installment agreements.
The IRS payment plan can be guaranteed if you have individual income tax liabilities of $10,000 or less. You also may qualify for a streamlined installment agreement if you owe up to $50,000 in income taxes and meet other requirements. If you owe over $50,000, the IRS will request an in depth review of your finances through a Collection Information Statement, often referred to as a 433-A. Finally, if you owe more than $250,000, your case will be handled by an IRS revenue officer, rather than by the automated collections system.
As of today, these general rules are modified under the IRS’s Taxpayer Relief Initiative. The IRS may close the initiative at any time. For more information, contact our office.
Your taxes are due when you file your tax return. As a result, in any installment agreement, you will owe penalties and interest for paying late. The distinctions between the types of installment agreements are important. If you need help determining which agreement to request, contact the tax lawyer today.
Minimum Monthly Payment
Your minimum monthly payment depends on the amount you owe. You can always pay more than the minimum, and you would encouraged to do so. Ultimately, paying more reduces the overall interest.
- If you owe $10,000 or less, the IRS will approve the “guaranteed” agreement so long as you full pay the tax and accruals within three years.
- If you owe up to $50,000, your minimum payment will be the greater of your total balance divided by 72 or full payment by the CSED. These agreements are streamlined because the IRS does not require detailed financials to approve the agreement.
- If you owe more than $50,000, the IRS will require financials to approve a routine installment agreement. These agreements must be full paid by the CSED.
- A partial payment installment agreement (or hardship agreement) allows you to pay whatever you can afford. The IRS will require financials and will review those financials every two years.
For example, let’s say you owe $47,000 based on your 2013 tax return. The tax liability was assessed on April 15, 2014. The CSED will expire in 2024. The IRS will not accept a minimum payment that full pays the liability in 72 months. Rather, the IRS will require a payment that full pays by the CSED, which is approximately 36 months from now. As a result, the minimum payment would be closer to $1,350. You would not need to provide financials in this case. To learn more about the CSED, see our blog here.
If you owe $47,000 and the CSED does not expire for nine years, you will need to full pay within 72 months under the streamlined installment agreement procedures. As a result, your minimum payment will be closer to $675 per month.
If, however, you were experiencing significant financial hardship, you may qualify for a partial payment agreement. You would need to provide financials to show hardship. If you can only afford to pay $50 per month, then that would be your minimum payment. The IRS looks closely at your financials in these cases. And, they would review your financials every two years to see if your economic situation has improved. Thus, you would be strongly encouraged to have an experienced tax lawyer review your case.
Contact an Experienced Ohio Tax Attorney
IRS Payment Plan Representation | Columbus Tax Lawyer
Porter Law Office, LLC is a boutique law firm that assists taxpayers with resolving tax debts with the IRS. Columbus, Ohio tax attorney Matthew R. Porter, Esq. LL.M. assists taxpayers with securing installment agreements with the IRS. If you have questions about whether your current tax liability and financial situation will qualify to enter into an installment agreement with the IRS, contact the experienced IRS tax lawyer at Porter Law Office, LLC today.