An Installment Agreement is an IRS resolution that allows you to pay your tax debt in monthly installments. There are various kinds of Installment Agreements based on the taxpayer’s debt amount and his or her ability to pay. A Partial Payment Installment Agreement is the only Installment Agreement that allows for tax debt reduction. All other Installment Agreements require full payment of the tax debt, including payment of penalties and interest.
Before applying for an Installment Agreement, consider the plan’s payment requirements. If you’re unable to make each payment on time, the IRS will terminate the agreement. In order to successfully resolve your tax debt, it’s critical to adhere to the terms of your plan. Also, you must keep these factors in mind:
- You must file your past tax returns
- Any refunds you’re entitled to after qualifying for an Installment Agreement will be applied to your tax debt
- Include your SSN, name, address, daytime phone number, tax years and return type on your every payment
- Pay the scheduled payments on time and at least the minimum amount determined
- Inform the IRS if your address, filing status, name or other contact information changes.
If an agreement is terminated because of non-compliance, the IRS may reinstate the agreement if they believe you will not default again. The IRS will also charge a reinstatement fee. As soon as a payment plan is terminated, the IRS begins to charge penalties and interest each month on the balance to be paid. The IRS may also initiate collection actions, but will not begin tax debt collection in the following cases:
- When an Installment Agreement request is being considered
- While an agreement is not terminated and is still in effect
- For 30 days after your request for an Installment Agreement is rejected
- While a request for reinstatement of a terminated agreement is being considered
If you believe that they may default on your agreement, you should contact the IRS before your next payment deadline.