Nicholas Frey

The Internal Revenue Service (IRS) is the agency responsible for collecting taxes in the United States. When taxpayers owe back taxes, the IRS provides payment plans to help individuals and businesses pay their tax debts over time. The three most common payment plans are offer in compromise, installment agreement, and partial pay installment agreement. This article will discuss how each plan works and the differences between them, including any differences between individual and business plans. Additionally, the article will address the time frames to pay for each plan, including the different time frames for individual and business plans.

Offer in Compromise

An offer in compromise (OIC) is an agreement between the taxpayer and the IRS that allows the taxpayer to pay less than the full amount owed. The IRS will accept an OIC if it is unlikely that the taxpayer will be able to pay the full amount of the tax debt, and if accepting the OIC will result in the most the IRS can expect to collect from the taxpayer.

To qualify for an OIC, the taxpayer must submit an application and provide detailed financial information to the IRS. The IRS will then review the application and make a determination as to whether the taxpayer qualifies for the OIC. If the IRS accepts the OIC, the taxpayer must pay the agreed-upon amount within a certain timeframe, which varies based on the terms of the agreement. For example, the taxpayer may have to pay the full amount within five months or over a period of up to 24 months.

There are differences between individual and business OICs. For example, businesses must provide more extensive financial documentation, and the IRS is more likely to reject a business OIC if it believes that the business can pay the full amount owed. Additionally, the time frame for paying a business OIC is generally shorter than that for an individual OIC.

Installment Agreement

An installment agreement (IA) is a payment plan that allows taxpayers to pay their tax debts over time in regular installments. To qualify for an IA, the taxpayer must owe less than $50,000 in back taxes, penalties, and interest, and must be able to pay the debt within 72 months.
To set up an IA, the taxpayer must submit an application to the IRS and agree to pay the full amount owed plus interest and penalties over the agreed-upon time period. The IRS will generally approve the IA as long as the taxpayer meets the eligibility requirements and agrees to the payment terms.
There are differences between individual and business IAs. For example, businesses must submit more extensive financial documentation, and the time frame for paying a business IA is generally shorter than that for an individual IA. Additionally, businesses that are required to pay taxes on a quarterly basis (such as those paying 941 taxes) may qualify for a shorter payment plan of up to 24 months.

Partial Pay Installment Agreement

A partial pay installment agreement (PPIA) is a payment plan that allows taxpayers to pay a portion of their tax debt over time in regular installments. To qualify for a PPIA, the taxpayer must owe more than $10,000 in back taxes, penalties, and interest, and must be unable to pay the full amount owed.
To set up a PPIA, the taxpayer must submit an application to the IRS and provide detailed financial information. The IRS will then review the application and make a determination as to whether the taxpayer qualifies for the PPIA. If the IRS accepts the PPIA, the taxpayer must pay the agreed-upon amount within a certain timeframe, which varies based on the terms of the agreement.

There are differences between individual and business PPIAs. For example, businesses must submit more extensive financial documentation and may have a shorter time frame for paying their debt under a PPIA. Additionally, the IRS may require a business to provide more documentation to show that it is unable to pay the full amount owed.

Time Frames for Payment Plans

The time frame for each payment plan varies based on the terms of the agreement. For example, an OIC may require the taxpayer to pay the full amount owed within five months or over a period of up to 24 months. An IA allows taxpayers to pay their tax debts over a period of up to 72 months, while a PPIA allows taxpayers to pay a portion of their tax debt over a period of up to 10 years.

Individual and business payment plans may also have different time frames. For example, businesses may have a shorter time frame for paying their debt under an IA or PPIA if they are required to make quarterly tax payments. Additionally, businesses may be required to submit more extensive financial documentation, which may take longer to review.

Frey Tax Law Firm Can Help Navigate and Set Up Payment Plans

Navigating the various payment plans with the IRS can be challenging, especially for individuals and businesses who are already facing financial difficulties. The Frey Law Firm can help individuals and businesses understand their options and set up payment plans with the IRS that work for their unique circumstances. With years of experience in tax law, the Frey Tax Law Firm has helped many clients successfully negotiate payment plans with the IRS and avoid further financial hardships.

Conclusion

When taxpayers owe back taxes, payment plans with the IRS can help alleviate the burden of paying the full amount owed all at once. The three most common payment plans are offer in compromise, installment agreement, and partial pay installment agreement. Each plan has different eligibility requirements and time frames for paying the debt. Additionally, there may be differences between individual and business payment plans, such as the required financial documentation and time frames for payment. The Frey Tax Law Firm can help individuals and businesses navigate these payment plans and set up an agreement that works for their unique circumstances.