Despite what most think, the IRS is determined to make people’s finances manageable. A program is to launch allowing Los Angeles residents who pay their taxes to do so easier. It intends to help locals pay off their taxes with long-term payment plans.
Although it is always best to pay off taxes when they are due, this cannot always be the case. So, finding a reasonable IRS payment plan that works for your current financial situation, also known as an installment agreement, is crucial here. With the aid of this agreement, the IRS helps create a period for paying off your tax debt.
Receiving a letter or notice from the IRS no longer needs to bring feelings of dread and despair. There are options available that make tax issues easier. Three current offers from the IRS, each with its criteria and eligibility statuses, can help. The three installment agreements are:
Streamlined Installment Agreement
Many who require an IRS installment agreement meet most requirements for a streamlined installment agreement as well. The few additional needs that require a second review include:
- Tax liability, interest, and penalties should not exceed $50,000
- The taxpayer must be able to pay off the balance within 72 months (6 years)
- The proposed payment must be more than or equal to the minimum acceptable amount, calculated by dividing the tax liability, interest, and penalties by 50
Like the general installment agreement, the IRS will not file a federal tax lien if the taxpayer covers the amount needed for the installment agreement.
Partial Payment Installment Agreement (High Balances)
With a partial payment installment agreement, the IRS can decide with the taxpayer to begin partial payments for their tax liability. To qualify, the taxpayer must first file a financial statement to report their income and living expenses.
The IRS evaluates the information to determine if the taxpayer is indeed eligible. If a taxpayer owns any resources or value that they can sell to pay off existing tax issues, that knowledge is critical for the IRS to know.
Non-Streamlined Installment Agreement
Non-streamlined Installment Agreement is an excellent option for taxpayers who owe more than $50,000 but can make monthly payments to the IRS. Instead of automatically approving this installment agreement, they settle on a non-streamlined agreement between the taxpayer and IRS.
After filing the necessary form, the taxpayer proposes an installment payment amount for the IRS to consider. Within a few months, the IRS contemplates whether to accept or reject the agreement offer put forth by the taxpayer.
What Is a Payment Plan?
A payment plan is an agreement made with the IRS by the taxpayer to pay owed taxes within a particular period. The installment agreement and the payment plans are not required to have payment in full. These can be beneficial in times of financial hardship.
Taxpayers can request a payment plan if they believe it is appropriate for their financial situation. It can be a practical option for those who need an extension to pay their tax debts. There are several methods of installment payments, including:
- Check or money order
- Credit card
- Debit card
- Electronic Federal Tax Payment System (EFTPS)
- Online Payment Agreement (OPA)
- Payroll deduction
Criteria that make one eligible for a payment plan include:
- The total amounting to less than $25,000
- If the taxpayer can pay the installment payment plan in less than 60 months
- If the taxpayer has filed all the required tax returns
The payment plans have specific fees attached to them. Once approval of the taxpayer for a payment plan completes, the tax bill adds a charge fee. Applications are available online on the IRS website.
Keep in mind a taxpayer having approval for an installment agreement does not necessarily mean they cannot revoke it at any point. Certain circumstances permit the IRS to cancel the installment agreement of the taxpayer. They include but are not limited to:
- Missed payment
- Inaccurate information provided
Conclusion
For Los Angeles residents, paying taxes no longer needs to be a painful experience. With the launch of these recent programs, the IRS aims to help those who qualify to pay their taxes off in a much more desirable and less challenging way. Ensure you meet all criteria and are eligible for long-term payment plans before considering your options.
Also Read: Reasons for Hiring A Tax Attorney