IRS Payment Plan Lawyers

Failing to pay your taxes when due may lead to a Notice of Federal Tax Lien and/or an IRS tax levy action. If you’re facing a significant tax debt, an IRS payment plan might be a lifeline. The IRS has set up a payment plan which was made to assist taxpayers who cannot pay the amount owed in full immediately. Whether you are an individual taxpayer or business owner, you need to fully comprehend what is required of you to avoid interests and penalties.

Victory Tax Lawyers specializes in guiding taxpayers through IRS payment plans, making sure you find the best solution that fits your unique situation. So, if you are looking to set up a payment plan with the IRS, we have a team of experienced tax attorneys ready to guide you every step of the way. Schedule a free consultation with us today.

What Is an IRS Payment Plan?

Simply put, an IRS payment plan is an agreement between you and the Internal Revenue Service (IRS) that allows you to pay your tax debt in an extended timeframe. This can be a huge relief if you’re struggling to come up with the full amount immediately.

An IRS payment plan known as an installment agreement involves making a series of payments for taxes over time. This agreement can be a way to minimize the stress on your finances. However, interest and penalties continue to accrue until the tax debt has been paid in full.

Failure to address tax bills could lead to severe consequences under tax law, including additional penalties, interest, or IRS collection actions, such as garnishing wages or seizing property. So, if you can’t pay the total amount due all at once, you can pay as much as you can.

Additionally, the IRS approves payment plans based on your eligibility, such as the amount owed and your ability to meet payment terms. An IRS payment plan lawyer can advise you on the most suitable repayment plan and ensure you comply with tax law.

IRS Payment Plan Options

Choosing the best plan for you depends on your unique financial situation. Factors like your income, living expenses, assets, and the amount owed are considered when choosing a plan. By choosing the appropriate plan you can avoid unnecessary financial stress and penalties. If you are unsure what plan is right for you, contact us today for a free consultation.

There are different IRS payment options, each with their own set of rules and requirements.

Pay Now Payment Plan:

With this payment plan, you can pay the amount you owe in one full payment. This method removes the stress of ongoing tax liabilities and avoids the accrual of additional penalties, interest, or future taxes. Individuals can pay directly from a checking or savings account (Direct Pay) with no setup fee.

Individuals and business owners can pay electronically online or by phone using the Electronic Federal Tax Payment System (EFTPS). Additionally, payment by check, money order, or debit/credit card is also allowed, although fees may apply when paying with a card.

This plan is suitable for taxpayers who have the finances to clear their balance quickly, as it avoids the compounding interest and penalties associated with delayed payments. However, for individuals who cannot manage a lump sum payment, this option may not be for you.

Short-Term Payment Plan:

This plan provides a practical solution for taxpayers who need slightly more time to pay off their balance. It is designed for those owing payments in 180 days or less. Like the Pay Now payment plan, you can pay by Direct Pay or EFTPS with no setup fee, or through check, money order, or debit/credit card, with applicable fees for card transactions.

Unlike Pay Now, this option includes additional penalties and interests until the balance is fully paid. This could lead to an increase in the overall cost of the debt. This plan is for those with manageable tax liabilities who can commit to paying the amount within the specified timeframe. It may not be suitable for those struggling with larger debts or needing more extended repayment terms.

Long-Term Payment Plan (IRS Installment Agreement):

This plan is tailored for taxpayers who need to spread their repayments over months or even years. There are two main types of long-term payment plans:

• Direct Debit Installment Agreement (DDIA): The amount you owe is automatically deducted from your bank account. There is a setup fee of $22 for online applications and $107 for phone, mail, or in-person applications. The setup fee is waived for low-income taxpayers.
• Non-Direct Payment: Payments can be made through non-direct electronic methods, such as debit/credit card or manual Direct Debit. If applied online, a $69 setup fee is required. while for low-income payers a $43 setup fee is required, with a possibility of reimbursement. Read low-income terms and conditions here. If your application request is done via phone, mail, or in person, a $178 setup fee is required. This option includes additional penalties and interests until the balance is paid in full.

One of the key benefits of this plan is its ability to accommodate a variety of financial situations, including partial pay agreements under specific conditions. This allows eligible taxpayers to settle their debts based on their ability to pay rather than the full amount owed. However, the plan includes ongoing interest and penalties until the debt is fully paid, which can significantly increase the total repayment amount over time.

Change from an Existing Payment Plan

This is for those who want to amend their existing IRS installment agreement payment plan. Changes can be made online for a $10 fee or through phone, mail, or in-person applications for $89. Low-income taxpayers benefit from reduced fees, with online changes costing $10 and phone/mail/in-person changes costing $43. These fees may be reimbursed if certain conditions are met.

See Form 13844: Application for Reduced User Fee for Installment Agreements if you believe you meet the necessary prerequisites for low-income taxpayer status, but the IRS misidentified you.

This plan is useful if you are experiencing changes in your financial situation, such as reduced income or unexpected expenses. This helps you align your repayment plan with your updated financial capabilities.

How Is the IRS Payment Plan Interest Rate Calculated?

The federal short-term interest rate, coupled with a predetermined percentage, decisively determines the greatly variable interest rate for an IRS Payment Plan.

• Federal Short-Term Interest Rate: The IRS sets the interest rate based on the federal short-term interest rate. This rate can change regularly and is typically updated quarterly.
• Additional Percentage: In addition to the federal short-term interest rate, the IRS adds a fixed percentage of 8% to determine the total interest rate.

To find the most up-to-date information on IRS Payment Plan interest rates, you can visit the federal government’s official IRS website or contact the IRS directly. Victory Tax Lawyers can also get this done for you. Don’t hesitate to get on a call with us today for a free consultation.

How Does Interest Accrue on Your IRS Payment Plan?

Interest typically begins to accrue from the date your tax liability is assessed until you pay the full amount. Here’s a breakdown of how it works:

Interest is calculated daily, meaning that the total amount you owe increases slightly each day until the debt is paid in full. Interest also compounds daily, meaning each day’s interest is added to the principal balance. This compounding effect can cause the total amount owed to grow faster than simple interest.

Additionally, when you make regular monthly payments, a portion of each payment goes toward the principal amount and the accrued interest. This means that as you make payments, the portion allocated to interest gradually decreases, while also reducing the principal.

Tips for Minimizing IRS Payment Plan Interest

While you may not have control over the federal short-term interest rate, there are strategies you can employ to minimize the interest you pay on your IRS Payment Plan.

One way to minimize interest is to pay off your debt early as it can significantly reduce the interest you owe. When you reduce the outstanding balance, you’ll also decrease the daily interest accrual. Another way is to consider a lump-sum payment if you have the means. This reduces the principal balance immediately, resulting in less overall interest.

The next is to set up automatic payments. Some IRS Payment Plans offer the option to set up automatic monthly payments. This makes sure you are consistent and on time with your payments, reducing the total interest accrued. Finally, you need to stay informed on changes in interest rates. If rates drop significantly, it might be beneficial to explore refinancing or modifying your existing payment plan to take advantage of lower rates.

What Happens if You Default on Your IRS Payment Plan?

If you miss a payment or fail to meet the terms of your agreement, the IRS may consider your plan in default. One of the possible consequences of default can include the termination of the payment plan. When your installment agreement is terminated, the full remaining balance could become due immediately. Another possible consequence are collection actions. The IRS may take collection actions, such as wage garnishment or bank levies, to satisfy the debt.

To prevent default, always communicate with the IRS or your tax lawyer if you encounter financial difficulties or circumstances (increased living expenses) that affect your ability to make payments. They may be able to modify your plan to better suit your current situation.

Requirements to Apply Online for a Payment Plan

If you have formerly registered for an Online Payment Agreement; Get Transcript; or an Identity Protection PIN (IP PIN), use the same login user ID and password to confirm your identity.

According to the IRS, there are various ways to apply tax refunds:

How to Apply as an Individual:

To apply as an individual, you must provide personal and identification details matching your most recent tax return.

1. Name indicated as it shows on your most recently filed tax return
2. A valid and accessible email address
3. Home address from your most recently filed tax return
4. Date and year of birth
5. Filing status
6. Social Security Number, or ITIN (Individual Tax ID Number)
7. You will need a bank account number, Mobile phone number, or Activation code to confirm your identity.

How To Apply as Power of Attorney (POA) for an Individual:

This is for qualified tax attorneys. When applying as a POA for an individual, you must supply verification details for both yourself and the individual you represent.

1. Identity verification (if not already provided)
2. Taxpayer’s Social Security Number or Individual Taxpayer Identification Number (ITIN)
3. Your Centralized Authorization File (CAF) number
4. Caller ID from taxpayer notice or signature date on Form 2848
5. Taxpayer’s last year’s Adjusted Gross Income

How To Apply as a Business Owner:

Business owners must provide specific business-related information, such as tax identification details and registration data.

1. Information verifying your individual identity (if not already provided)
2. Employer Identification Number (EIN)
3. Date business established
4. Address from most recently filed tax return
5. Your Caller ID mentioned in the notice

How To Apply as Power of Attorney (POA) for a Business:

Just like that of an individual, you are to verify your identity as a POA and provide the business’s relevant tax and authorization details.

1. Information to verify your identity (if not already provided)
2. Taxpayer’s Employer Identification Number (EIN)
3. Your Centralized Authorization File (CAF) number
4. Caller ID from notice or POA’s signature date on Form 2848
5. Based on the type of agreement requested, you may also need: the business address of the most recently filed tax return, tax forms filed or examined, and tax period filed or examined

Need Help from an IRS Payment Plan Lawyer?

Do you have a tax debt? An IRS payment plan offers a structured and manageable way to pay off your debt, helping you avoid the stress and financial burden of settling your debts all at once. These are plans through which you can settle your debt in weekly, biweekly, or monthly payments which can protect you from accruing additional penalties and interests while maintaining your financial stability. Moreover, having a payment plan helps you stay compliant with tax requirements, safeguarding your credit score and also preventing legal actions.

Whether you are an individual or a business, it’s important to understand these plans to make an informed decision as to what plan works best for you.

Our expert team at Victory Tax Lawyers has garnered numerous favorable reviews from both colleagues and clients. Our experienced tax attorneys are ready to help if you are facing difficulties when filing your tax return. Contact us today for a free consultation.