As many Boston residents start preparing their tax returns, finding out they owe money may come as a surprise. Preparing their returns now could give them the time to save up the money owed, but then again, it may not. Many taxpayers’ budgets are stretched enough without adding a tax bill into it. Under those circumstances, they could enter into installment agreements.
These agreements allow the taxes owed to be paid in monthly payments instead of one lump sum. The agreement does not wipe away or stop interest and penalties on the balance. However, for those who cannot simply fork over hundreds or thousands of dollars in one shot, it remains a viable option for avoiding any unpleasant and unnecessary entanglements with the IRS.
In order to use this option, taxpayers must meet certain criteria. They must be unable to pay the amount due, but be able to pay it within three years. They must have filed all applicable tax returns for past years and cannot have entered into an installment agreement within the last five years. If the amount owed is less than $10,000, the request may be automatically approved, but for those who owe more than that, the situation is not quite as simple. Taxpayers who owe over $50,000 could have additional hurdles as well.
Obtaining approval for an installment agreement is not always easy, depending on the amount owed and the filer’s circumstances, but the benefits may be worthwhile. Installment agreements can give Boston residents some relief from worrying about whether they can pay the amount owed in taxes. They also stop any efforts by the IRS or its private collection agencies to collect the taxes owed.