An installment agreement, or pago a plazos as it`s known in Spanish, is a payment plan that allows you to pay off your tax debt over time. It is an option that the Internal Revenue Service (IRS) offers to taxpayers who cannot pay their taxes in full immediately. This agreement allows you to make monthly payments until the entire amount is paid off.
The IRS installment agreement is a legal agreement between you and the government. Once you agree to participate in this program, you are bound to make payments until you have fully paid off your tax debt. It`s important to note that an installment agreement does not reduce or eliminate the amount of taxes you owe. Instead, it provides you with an affordable way to pay off your debt over time.
There are two types of installment agreements: guaranteed and streamlined. A guaranteed installment agreement is for taxpayers who owe less than $10,000, have filed all tax returns, and have not entered into an installment agreement in the past five years. With this type of agreement, the IRS is required to accept your payment plan.
A streamlined installment agreement is for taxpayers who owe less than $50,000 and can pay off their debt in 72 months or less. To qualify for this type of agreement, you must also have filed all tax returns and have not defaulted on a previous installment agreement.
To apply for an installment agreement, you can do so online, by phone, or by mail. Once you have been approved, the IRS will send you a monthly statement that shows how much you owe and the due date for your next payment. It`s important to make your payments on time to avoid penalties and interest charges.
If you cannot make your payments, you should contact the IRS as soon as possible to discuss your options. You may be able to change your payment plan or temporarily suspend your payments until you are able to resume making payments.
In conclusion, an installment agreement is a useful tool for taxpayers who cannot pay their taxes in full when they are due. It provides a way to pay off your debt over time and avoid the consequences of not paying your taxes. If you are struggling to pay your taxes, consider applying for an installment agreement to help alleviate your financial burden.