If you owe $50,000 or less, you may be eligible for an IA payment plan for up to 6 years. Start by requesting it. If you owe more than $50,000, you will have to negotiate with the IRS and provide financial information.
As part of its Fresh Start program, the IRS recently implemented new rules to make it easier to obtain an IA. The threshold for qualifying for an IA without having to provide financial information was increased from $25,000 to the current amount of $50,000. And the timeline for paying was increased to 6 years from 5 years.
IA Eligibility Requirements
- You must be up-to-date with your tax returns. In other words, all past tax returns must have been filed.
- If you are a business owner or self-employed, you must be current on your quarterly estimated tax payments for the current year.
- If you have workers, you must be up-to-date with your payroll tax deposits and Form 941 filings.
While these allowances are available, you should not presume that an IA plan is your best option. An IA also comes with some disadvantages: interest and penalties continue to accumulate while you still have an outstanding balance. With penalties, the yearly interest rate will be high. So, you may end up paying more than the amount you owed because of the number of years and the interest. This is why the IRS encourages taxpayers to pay taxes immediately.
If you need help to stay current with your tax returns, give us a call or message us. Our trained tax consultants will provide you with solid tax advice.