IRS Form 13844: Application for Reduced User Fee for Installment Agreements
If you’ve recently made a payment plan request and it was approved by the IRS, there are fees you must pay in order to set up monthly installments and settle your debt once and for all. These fees can range from $149 to $225, which can be quite costly for some. However, qualifying individuals may be able to reduce the fee to a much more manageable amount using Form 13844. Keep reading for a comprehensive overview of Form 13844 and IRS payment plans, or use the links below to navigate the post.
- What is IRS Form 13844?
- IRS Payment Plans
- What to Know About Entering an Installment Agreement
- Form 13844 Instructions
What is IRS Form 13844?
Form 13844, Application For Reduced User Fee For Installment Agreements, is a formal document created by the IRS to reduce user fees for taxpayers who are not already classified as low-income and are applying for a tax debt payment plan.
IRS Payment Plans
Being in debt with the IRS can be frightening, and for some taxpayers, it can feel like they’re swimming in their tax debt. If you owe money to the IRS, it’s best you pay your debt in full right away to avoid costly penalties. However, overwhelming tax debt balances can be more difficult to get rid of and not all taxpayers can fully complete their payments within the filing deadline. For taxpayers who are currently struggling to repay their tax debts, the IRS offers some payment plan options, called installment agreements, to help taxpayers avoid further debt and collection measures.
Being approved for an IRS payment plan means you have a contractual agreement with the IRS to pay off your debts within an extended timeframe. By confirming this option, you not only have additional time to ensure you complete your total tax repayments, but you can also avoid facing penalties from the IRS.
The IRS cites the following as benefits to payment plans:
- Avoid accruing additional interest and fees
- Avoid a future tax refund offset
- Avoid credit report issues that may jeopardize your eligibility for new loans or lines of credit
How to Get an IRS Installment Agreement
To be approved for an IRS installment agreement, you’ll need to first evaluate the installment agreement options to find the best one for your situation. You should consider the amount you owe on your taxes and see which payment plans you may be eligible for.
There are four common types of payment plans offered by the IRS:
- Guaranteed Installment Agreement: The IRS may automatically approve this installment if you meet certain criteria, including not owing more than $10,000, haven’t filed a late return or payment in the last five years, agree to file and pay on time in the future, agree to pay your debt in three years, and aren’t currently experiencing bankruptcy.
- Non-Disclosure Installment Agreement: If a taxpayer owes less than $25,000, they’re able to use a non-disclosure installment agreement to settle their debt. People who opt to use this installment plan usually do so because they don’t have to disclose extensive financial information.
- Streamlined Installment Agreement: The streamlined installment agreement is similar to the non-disclosure installment agreement, except you can use it on debt that’s more than $25,000.
- Partial Payment Installment Agreement: This form of installment agreement is used by taxpayers that don’t qualify for the ones mentioned above. Your monthly payments are based on how much you can afford.
Feeling overwhelmed by the IRS payment plan options available? Using a tax relief service—like the one offered by Community Tax—can help you evaluate your current tax debt and develop a payment plan that’s suitable for your budget. Our team is experienced with installment agreements and know how to get your request approved by the IRS quickly.
Once you’ve decided which payment plan you qualify for, you’ll need to apply for an installment agreement with the IRS.
What to Know About Entering an Installment Agreement
Depending on your financial situation, an IRS payment plan could be the best option for you in order to settle your debt. However, there are a few things you should consider before applying for an installment agreement from the IRS. We’ll answer a few of the most common questions below.
Are There Fees for Entering an Installment Agreement with the IRS?
The IRS does incur user fees upon entering an installment agreement. These fees are used to cover the costs associated with processing installment agreements and are generally:
- $105 for non-direct debit installment agreements
- $52 for direct debit installment agreements (DDIA)
A direct debit installment agreement means the taxpayer will see automatic payment withdrawals from their bank account; whereas a non-direct installment agreement uses the taxpayer’s debit or credit card to complete their payments.
What are the IRS Installment Agreement Guidelines for Low-Income Individuals?
The IRS offers a reduced fee of $43 for taxpayers that meet or are below the government’s poverty guidelines. In certain cases, the IRS may even waive the fee altogether if specific requirements are met.
Taxpayers that are already classified as low-income will automatically see the appropriate reduced charge upon entering an installment agreement. Low-income taxpayers who are able to commit to a DDIA will have their user fee waived by the IRS, while those who are unable to enter a DDIA and are planning to pay their installments with a non-direct agreement may have their user fee reimbursed once they have completed all their payments.
Can I Make Changes to My IRS Installment Plan?
If you would like to change the amount you pay monthly, the payment schedule, allow automatic payments, or renew a payment plan you’ve fallen behind on, you can. However, you’ll only be able to if you’re not using a DDIA. Here are a few things you should note before making changes to your installment agreement:
- You may have to contact the IRS directly if payments are set up via your bank account
- There could be a fee associated with the reinstatement of your plan if it went into default
Who Qualifies for an IRS Installment Agreement?
Individual taxpayers may be eligible to apply for a long-term installment agreement online if their tax debt is $50,000 or less (this includes acquired penalties and interest) and have filled the appropriate returns. To file a short-term payment plan instead, your debt should be less than $100,000.
Businesses also may qualify for a long-term installment plan if all of the required returns have been submitted and $25,000 or less is owed. Note that sole proprietors and independent contractors who wish to file an installment agreement request should follow the requirements listed for individual taxpayers.
If you’re currently applying for an installment plan with the IRS but have not been classified as a low-income taxpayer, you may want to consider filling out the IRS reduced user fee form. Individuals must meet the IRS income requirement to qualify for a fee reduction on an IRS installment agreement.
Form 13844 Instructions
If you’ve determined that submitting Form 13844 is the best choice for you, we’ve provided step-by-step instructions to help you fill it out correctly. However, before diving in, let’s take a look at what you’ll need to have ready:
- Name, as it appears on your tax returns. If you’re married, include your spouse’s name as well
- Social Security number or Individual Taxpayer Identification Number (TIN)
- Adjusted gross income
Make sure to fill out Form 13844 within 30 days of receiving your installment agreement acceptance letter from the IRS.
Step One: Download Form 13844
Download the official IRS Form 13844 from the IRS website. To help you complete the form, have your completed paperwork from the current tax year ready. Form 1040 will help you fill out Form 13844.
Step Two: Fill Out Form 13844
First, refer to the Low-Income Taxpayer Adjusted Gross Income Guidance chart on Form 13844 to see if your income is lower than the specified low-income category for your state and family unit size. If your income is lower than what’s stated, you qualify for a reduced rate. However, if your income is higher than this number, you don’t qualify and should not proceed with Form 13844.
Once you’ve confirmed you’re eligible to apply based on your income, fill out your tax information accordingly. Both you and your spouse will need to sign and date the bottom of the form.
Step Three: Where to Mail Form 13844
Mail your completed form to the following address:
Internal Revenue Service
P.O. Box 219236, Stop 5050
Kansas City, MO 64121-9236
Step Four: Get Confirmation from the IRS
You’ll have to wait for a response from the IRS to determine the status of your application fee.
Step Five: Make Your Installments and Get Back On Track with the IRS
The best way to remain in good standing with the IRS is to pay off your tax debt fully and on time. Failing to pay your taxes on time could result in serious collection measures, like tax liens that can damage your credit score. Making your installment payments each month is crucial to getting back on track with the IRS.
Form 13844: Key Takeaways
While an installment agreement with the IRS is a great way to help you manage and repay your tax debt, the user fees associated with it could be a significant barrier for some individuals. If the user fees are out of your means or you would like to save money on your payment plan, consider filling out Form 13844. Here’s what to remember about the IRS’ installment agreements and Form 13844:
- You must meet the low-income requirements to receive a reduced user fee
- The installment agreement established by you and the IRS is a legally binding contract that could have financial repercussions if you stop making your payments
- The IRS offers four types of payment plans: Guaranteed, non-disclosure, streamlined, and partial payment installment agreements
- Low-income taxpayers that are already classified as such by the IRS will automatically see a reduced fee
Community Tax can help ease the process of setting up installment agreements and getting approved for a reduced user fee for your payment plan with the IRS. Contact us today by calling (833) 573-0251 or email us at firstname.lastname@example.org to see how we can help you with your payment plan and Form 13844.