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4 Tips to Reach a Tax Installment Agreement with the IRS

At the time of filling out your tax returns, if you owe more than you can pay, you can avail installment facility. This facility helps individuals and businesses manage their tax liabilities. It allows taxpayers to pay their tax debt over time in manageable monthly installments.

Tax Installment Agreement with the IRS

By availing this facility, you can divide your tax into monthly installments that you can pay easily. But the question is how you can do this and what benefits it will provide you with. In this blog, we will jot down some of the most important tips that will help you reach a tax installment agreement with the IRS.

Keep reading these tips carefully to find useful insights.

1. Understand Your Tax Debt

Before pursuing a Tax Installment Agreement, it's essential to have a clear understanding of your tax debt. This includes the total amount owed, any accrued interest and penalties, and the tax years involved.

You can obtain this information from your tax returns, IRS notices, or by contacting the IRS directly. Understanding the specifics of your debt will help you negotiate effectively and choose the most suitable IRS installment agreement plan.

2. Choose the Right Type of Agreement

The IRS offers different types of installment agreements, each tailored to specific financial situations. In most states, these types of agreements include guaranteed installment agreements, streamlined installment agreements, and partial payment installment agreements.

A guaranteed installment agreement option is available if you owe $10,000 or less in combined tax, penalties, and interest and you have filed all required tax returns. This type of agreement is usually approved automatically.

A streamlined installment agreement involves an option in which you owe $50,000 or less and can pay off the debt within 72 months. Approval for this type of agreement will require no detailed financial information.

The partial payment installment agreement is for those who cannot pay the full amount within the allotted time frame. It allows you to make smaller monthly payments, but you will need to provide detailed financial information to demonstrate your inability to pay in full.

3. Prepare Financial Documentation

Regardless of the type of installment agreement you pursue, you will need to provide detailed financial information to the IRS. This information will include your income statements, asset documents, expense documentations, and any other relevant financial documents.

Accurate and thorough financial documentation is crucial for the IRS to assess your ability to meet the terms of the agreement. So, make sure you have gathered all the required documents to be eligible for the installment agreement.

4. Comply with the Agreement

Many installment agreements also get canceled after the agreement has been approved. So, you will have to take special care even after the agreement to keep your agreement valid and make sure to adhere to agreed-upon terms.

This includes making timely monthly payments and ensuring that you stay updated on any future tax obligations. Unfortunately, if by any means, you fail to comply with the terms of the agreement, it can lead to the IRS terminating the agreement and pursuing further collection actions.