As a taxpayer, one of the most stressful situations you can find yourself in is owing the IRS money. Fortunately, the IRS offers a variety of options to help taxpayers pay their debts, including installment agreements. However, many people don`t realize that there are time limits associated with these agreements.
An installment agreement is a payment plan that allows taxpayers to pay their tax debt over time rather than in one lump sum. To qualify for an installment agreement, you must owe less than $50,000 in tax, penalties, and interest and have filed all required tax returns. Depending on the size of your debt, you may be required to provide financial information to the IRS to determine your eligibility.
Once you enter into an installment agreement, it`s important to understand that there is a statute of limitations associated with the agreement. The statute of limitations is the amount of time the IRS has to collect the debt. For installment agreements, the statute of limitations is generally ten years from the date the tax was assessed.
This means that if you enter into an installment agreement for a tax debt that was assessed in 2015, the statute of limitations to collect that debt expires in 2025. After that time, the IRS will no longer be able to collect the debt from you.
It`s also important to note that certain actions can extend the statute of limitations. For example, if you file for bankruptcy, the statute of limitations is suspended until the bankruptcy is resolved. Similarly, if you leave the country for an extended period, the statute of limitations is suspended for that time period.
When entering into an installment agreement, it`s important to consider the length of the agreement and the statute of limitations associated with it. If you enter into an agreement that extends beyond the statute of limitations, you may be paying more than you need to. On the other hand, if you enter into an agreement that is too short, you may not have enough time to pay off the debt.
If you`re considering an installment agreement, it`s always a good idea to consult with a tax professional. They can help you understand the options available to you and guide you through the process of negotiating a payment plan with the IRS.
In conclusion, an IRS installment agreement can be a helpful tool for taxpayers who owe money to the IRS. However, it`s important to understand that there is a statute of limitations associated with these agreements. By considering the length of the agreement and the statute of limitations, you can ensure that you`re making the best decision for your financial situation.