Q: Can I arrange for a payment plan with the IRS?

A: Yes, you can, and it's easier and faster than you might expect. Setting up a payment plan is usually the easiest way to deal with your tax debt when you can't afford a lump sum. When you can't pay your tax debt off at one time, the interest, penalties, and dire consequences like liens and levies can seem insurmountable. Luckily, payment plans, or installment agreements as the IRS refers to them, can help you get rid of your tax debt without any of those threatening repercussions.

To begin setting up your installment agreement, first figure out how much you owe. Check your copies of your tax returns, or call the IRS for an updated figure if you think you may have accrued interest or penalties. Then you can either sit down with a tax professional and fill out Form 9465, the Installment Agreement Request, or you can apply yourself online. You'll be able to choose the date that you want to pay each month and the monthly payment that you can afford to pay each month. The IRS will review your application and within thirty days, they will notify you to let you know if your plan is approved. You will be approved automatically as long as you meet the installment agreement guidelines, which state that you must owe less than $10,000 total, and your monthly payments must pay off your debt in full within three years. If you do not meet the criteria for automatic acceptance into the installment agreement plan, you can still be approved. Contact a tax professional and they can help you negotiate with the IRS.

Remember that in order to be approved, you must be current with the IRS. If you have returns that you haven't filed yet, you must do so before you can even consider a payment plan. The IRS also has several payment options to make your payment plan even more convenient. Now you can have your payment withdrawn from your bank account each month. This is especially handy because the IRS doesn't take kindly to late payments. If you do want to send a check or money order, make sure you send it seven to ten days before your due date. If you are late with a payment, even if it's the fault of the postal service, the IRS can choose to cancel your installment agreement. Make sure you play it safe when you're dealing with the IRS.

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