The Kentucky state and the US federal laws require eligible taxpayers to file their returns on time to avoid hefty penalties and other repercussions. However, several people in Kentucky fail to pay their taxes due to financial incapabilities.
While the tax laws and regulations mandate penalties for not paying taxes on time, intentionally not paying the taxes is regarded as tax evasion and can cause severe consequences. However, if you do not have enough money to pay your taxes, you can apply for the IRS tax payment plan. You can also seek the help of a tax advisor in Louisville, KY, to help you with your pending taxes.
Understanding the IRS payment plans
The IRS payment plan is an agreement between you and the agency to pay your taxes in a phased manner over time. You can set up a payment plan with the IRS via phone, in person, or online.
The IRS offers two types of payment plans:
- Short-term: With a short-term tax payment plan, you can pay the due taxes within 180 days.
- Long-Term: With the long-term payment plan, aka the installment agreement, you can pay your balance taxes in equated monthly installments over 180 days to six years.
IRS installment agreement eligibility
Most taxpayers qualify for IRS payment plans. However, here are the qualifying criteria for the short-term payment plan:
- The total amount owed for taxes, penalties, interest, etc., must be less than $100,000.
- The due amount must be paid within 180 days.
- Businesses, individuals, and self-employed individuals can apply for this plan.
The long-term IRS payment plan criteria are as follows:
- The total amount owed for taxes, penalties, interest, etc., must be less than $50,000 for individuals and less than $25,000 for businesses.
- You have to agree to equated monthly installments through direct debit.
- The due amount must be paid within 180 days to six years.
- Businesses, individuals, and self-employed individuals can apply for this plan.
Other methods to pay your due taxes
Apart from applying for the IRS payment plan, you can also resort to one of the following methods to pay your taxes:
- You can apply for an Offer in Compromise (OIC) and request the IRS to reduce the owed tax amount on the grounds of financial incapability to pay the owed tax amount.
- Pay your taxes using a 0% APR credit card, which can help you dodge the IRS penalties.
- Apply for a low-interest personal loan to pay tax bills.
- Borrow an amount against your home equity with a home equity line of credit (HELOC).
