Long Term Payment Plan (Installment Agreement)

A long term payment plan, also known as an installment agreement, is an option for taxpayers who are unable to pay their tax debt in full immediately. This agreement allows taxpayers to pay off their debt over time in manageable monthly payments.

The IRS offers long term payment plans for those who owe less than $50,000 in tax debt and can pay off their debt within six years. The installment agreement requires a set monthly payment, which includes both the principal amount owed and any interest and penalties incurred on the unpaid balance.

To apply for a long term payment plan, taxpayers must file Form 9465, Installment Agreement Request, with the IRS. This form requires taxpayers to provide detailed information about their financial situation, including their income, expenses, and assets.

The IRS will review the taxpayer`s financial information and determine an appropriate monthly payment amount. The payment amount will be based on the taxpayer`s ability to pay and will typically be less than the total amount owed.

It`s essential to note that interest and penalties will continue to accrue on the unpaid balance. However, the interest rate on the installment agreement is generally lower than other IRS penalties, such as late payment penalties.

Taxpayers must make their monthly payments on time and in full, or they risk defaulting on the installment agreement. If a taxpayer defaults, the IRS can take enforcement actions such as wage garnishment or seizing assets to collect the outstanding debt.

Taxpayers can also modify or cancel their installment agreement by submitting Form 9465 to the IRS. However, modifying or canceling the agreement may result in additional fees and penalties.

In summary, a long term payment plan is an option for taxpayers who cannot pay their tax debt in full immediately. This agreement allows taxpayers to pay off their debt in manageable monthly payments. However, taxpayers need to understand the terms and conditions of the agreement and make payments on time to avoid defaulting on the agreement.