Your work was going very well in the first part of the year, so you planned to take your profits and build up. Suddenly, your sales dropped off, and you were left barely scraping by. As tax time came around, you realized that you were self-employed and would need to come up with several more thousand dollars than you have. It’s just too much to come up with before the deadline.
If you find yourself in this situation, you may want to set up a payment plan with the IRS. The IRS charges a fee for you to do this, but you can then make monthly payments on what you owe. This protects you against accusations of failing to pay and gives you the opportunity to get your finances back on track.
What’s the major benefit of an installment plan with the IRS?
The major benefit of an installment agreement with the Internal Revenue Service is that the agency won’t place a levy against you or file a tax lien as long as you’re attempting to make payments. You should know, however, that the installment agreement does come with interest and penalties, even if you do have an agreement with the IRS.
The good news for most people with moderate incomes is that the IRS will agree to an installment plan for any amount owed under $10,000. You do need to show that you have not paid late or filed late in the last five years, don’t have an open bankruptcy pending and can pay what you owe within three years. You should also agree that you will pay on time in the future.