If current financial setbacks hinder you from making your IRS installment payment this month, here are the options available to you.
Options to Consider for Your IRS Installment Payment Plan
Installment Payment Plans Offered by the IRS
If you have made an installment agreement with the IRS, you probably have opted for one of these plans:
Short-Term Payment Plan
This IRS installment payment plan allows you to repay what you owe within 120 days or fewer. The different modes of payment include check, money order, or credit/debit card.
This payment plan setup can be done for free by mail, phone, in person, or online.
Long-Term Payment Plan
This IRS installment payment plan allows you to repay what you owe beyond the usual 120-day period. Mode of payment can either be via direct debit (straight from checking account) or non-direct debits such as by way of credit/debit card, check, money order, or Direct Pay.
Low-income taxpayers can pay as low as $31 to set up this IRS payment plan. Some different ways to set up this payment plan include by mail, phone, in person, or online.
Now, what options do you have if you are cash-strapped and cannot make your scheduled IRS payment?
Step 1: Wait Until the Payment Schedule’s Expiration Date
Sometimes the best thing to do is not to do anything at all. Just sit back and wait for things to unfold on their own.
This advice may sound counterintuitive, and even legally problematic. If done right, however, it can prove to be a pretty solid strategy.
Here’s what you need to do.
Wait until your payment schedule expires. After a month of non-payment, expect the IRS to reach out to you via the CP523 or Notice of Intent to Terminate Your Installment Agreement.
The Internal Revenue Code 6159(b)(5) legally mandates this legal correspondence.
You have until 60 days after receipt of the IRS Notice CP523 to dispute the intent to terminate your existing IRS installment agreement. The Internal Revenue Code 6331(k)(2) protects you from any levy actions on your assets and properties throughout this 60-day period.
This strategy is best for taxpayers in need of more time to assess their payment options. If you feel your current IRS installment agreement plan no longer proves financially viable on your end and you wish to exhaust all possibilities before signing a new deal, this method affords you time to carefully discern your financial situation.
With this advice, we do not mean you become complacent. This is merely a roundabout way to keep tax payment at bay without getting into any legal trouble.
Levy Definition: Legal collection of debt via seizure or sale of a debtor’s existing assets or property.
Step 2: Speak with an IRS Agent
If you remain transparent about your present financial situation, chances are the IRS will not disappoint you regarding your request for a much-needed tax breather. This is especially true if your current predicament is short-term.
Suppose you asked for a one month IRS installment payment extension, you might not even be required to give a reason for your request. There is a high probability that your request would be granted right off the bat.
However, your request must be filed a few weeks in advance. If you make the mistake of waiting until the due date, your IRS payment plan will be on default by the time your request processes.
The longer your requested extension is, the more information the IRS will need. This is the agency’s way to determine the legitimacy of your request for payment deferral.
For instance, if your area was recently hit by a hurricane, leaving your house in need of immediate repairs which resulted in your inability to pay your IRS installment agreement plan for at least six months, the IRS might ask you for copies of incurred repair bills. They might also ask for photos of your house during the flooding, as well as pre- and post-repair pics.
All that is in addition to the usual IRS collection information statement.
Step 3: Request for Permanent IRS Installment Payment Reduction
Your exact financial situation must be fully disclosed to the IRS for this request to be granted. Usually, the IRS will require you to furnish the agency with an updated collection information statement, by way of either Form 433F or a 433A.
Your accomplished Form 433F or 433A should clearly show either how your living expenses have considerably increased or how your income has substantially decreased compared to when you signed your existing IRS installment agreement plan.
Aside from these forms, the IRS will also require you to submit other supporting documents.
These documents may include pay stubs, unemployment compensation, car payment, utility expenses, and health care costs to name a few. The IRS will base its eventual decision on the veracity of these submitted documents.
Your new financial statement could afford you with specific tax relief. The possibilities include the IRS reducing the current amount of your payment plan.
Step 4: Apply for IRS Tax Relief
The IRS could also tag your account with an “uncollectable status.” This status basically acknowledges a taxpayer’s dire economic situation and the fact that IRS payment will worsen the said taxpayer’s financial difficulties.
Depending on the severity of your case, the IRS could consider you qualified for an “Offer in Compromise” or even bankruptcy.
Sometimes we simply cannot avoid financial roadblocks from happening. This is something the IRS acknowledges. They have systems in place to aid taxpayers who cannot cater to their IRS payment agreement.
Speak with an IRS agent or a tax consultant about the choices you have concerning IRS installment payment resolution or deferment.
Have you ever had to change or defer your IRS installment payment plan in the past? Tell us and our readers about your experience in the comments section below.
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.