Hi, I'm Tec CPA Jim Tripp on with some important facts to keep in mind when you're trying to set up a payment plan with the IRS. IRS payment plans are an area that my CPA firm in Houston gets questions about all the time. If you owe the IRS money and you can't pay it in a single lump sum, an IRS payment plan may be your only hope to avoid very serious consequences from the IRS, such as asset seizures, bank and wage levies, and federal tax liens. Our CPA firm works with taxpayers not only in Houston but also nationwide to negotiate favorable IRS payment plans. And here's the truth about how IRS payment plans really work: if you currently owe tax debts to the IRS, payment plans are available. The primary payment plans offered to both individual taxpayers and businesses are installment plans or offering compromises. Now, while both options offer advantages to the taxpayer, most tax professionals will attempt to reach an agreement in terms of a partial payment installment plan. Why? Well, it's less time-consuming and often easier to achieve than an offer and compromise. A partial payment installment plan involves the individual taxpayer making monthly payments to the IRS for the purpose of repaying their tax debt. Now, usually the payments don't constitute the entire tax debt owed, but once the individual completes their payment plan, the remaining portion of any tax debt will normally be forgiven by the IRS. And this repayment option is available both to individuals and to businesses. Now, if that tax debt is less than $25,000, a 60-month repayment plan may be an option. It's also referred to as a small dollar repayment plan. On the other hand, if the taxpayer opts to attempt an offer and compromise for less...
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Irs Payment Plan Form: What You Should Know
If you pay under this agreement, you agree to be liable for all taxes shown for that tax year. Each time you pay, you agree to include the on and on the of each month thereafter. The following is a list of what each of these amounts' means: I. Amount of tax payable: This is the total amount of tax shown on your return for that tax year. P2. Amount due: This is the amount you owe based on your tax liability in the preceding year. S2. Interest on tax: The total amount owed for that tax year and interest is calculated by multiplying the tax for that tax year by the prime rate published by the Federal Reserve Board at the end of 30 days before the due date. I1. Interest rate for tax year: The interest rate is equal to the amount of interest earned by the federal funds rate for money market funds for the preceding calendar year. A fixed rate, such as 3%, is assigned by the Federal Reserve Board at the end of each month to the Federal Reserve Bank of New York on behalf of the federal funds rate. The current federal funds rate is the rate on which short-term U.S. government loans are bought and sold on discount markets by federal financial institutions as a means of funding the federal government's operations. 3% represents the prime rate multiplied by the number of days during the calendar year, the result divided by 365. Therefore, the table provides interest at the prime rate of 3%. S10. Pay off amount: This is the total amount you pay, multiplied by 1 per month. For example, if your balance is to be paid in 200 installments, the monthly payment will be 1 per month. II. Additional Costs and Fees: Additional costs and fees for IRS installment agreements include: S1. Tax and penalty, interest, and late penalty: You agree to pay federal taxes and to pay the penalties, interest, and late penalty set forth in Section A. The total amount of taxes and penalties set forth in Section A. will be prorated against each monthly installment. S2. Payment Plans: 1) To establish a payment plan through your online account using the Online Payment Agreement application, all the information needed to submit your application is included in online applications. 2) If your application is approved, the IRS uses the information to issue an electronic Invoice. These invoices include the payments due and your installment agreement terms.
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