A Tax Debt Installment Agreement is a debt relief program that allows taxpayers to pay off their Internal Revenue Service tax debt over time.

Tax Debt Installment Agreement

What Is An Installment Agreement?

A Tax Debt Installment Agreement is a debt relief program that allows taxpayers to pay off their Internal Revenue Service tax debt over time. The Installment Agreement permits a taxpayer to pay off his/her tax balance over time, but with stringent qualification and payment requirements. However, because interest and penalties will apply, the IRS encourages taxpayers to pay taxes immediately as interest and penalties can equal 8% to 10% per year.

Tax Debt Installment Agreement Types

The IRS has four different types of tax debt Installment Agreements: Guaranteed, Streamlined, Partial Payment, and Non-Streamlined. Both Guaranteed and Streamlined tax debt Installment Agreements are full repayment plans, under $50,000 in tax debt. These do not require detailed information of your income and assets, and the IRS does NOT file a federal tax lien against you.

The latter two tax debt Installment Agreements, Partial Payment and Non-Streamlined, are not full payment plans, require more support documentation and are more difficult to qualify for.

Your specific financial situation, upon review by the IRS, will determine which tax debt payment plan you will be approved for.

 

 

Guaranteed Installment Agreement

Taxpayer Requirements
  • Owes less than $10,000 (not including interest and penalties);
  • 5 years of filed tax returns, paid taxes owed, and has not entered into an installment agreement;
  • Unable to pay the tax debt when due or within 120 days;
  • Tax debt will be paid off within three years;
  • Must pay at least the minimum monthly payment (tax liability, interest, and penalties divided by 30)
You must pay a fee to set up the tax debt installment agreement or a reduced fee for a direct debit installment agreement. The IRS does not file a federal tax lien.

Streamlined Installment Agreement

Taxpayer Requirements
  • Owes less than $50,000 (including interest and penalties);
  • 5 years of filed tax returns, paid taxes owed, and has not entered into an installment agreement;
  • Tax debt will be paid off with six years;
  • Must pay at least the minimum monthly payment (tax liability, interest, and penalties divided by 50).
You must pay a fee to set up the tax debt installment agreement or a reduced fee for a direct debit installment agreement. Like a guaranteed installment agreement, the IRS does not file a federal tax lien

 

 

Partial Payment Installment Agreement

A partial payment agreement allows the IRS to enter into agreements with you for the partial payment of a tax liability. To qualify for this arrangement, you must complete a financial statement using Form 433-F, Collection Information Statement to report income and living expenses. The IRS will review and verify the information. If you have assets that can be sold to pay some of the tax debt, the IRS will require you to provide additional information.

If approved, you will be required to participate in a financial review every two years. This review may result in the increase in installment payments or the termination of the agreement.

The information that you will need to prepare in advance of your IA application include:

  • All income and living expenses.
  • All assets and their market values.
  • Bank statements from the last three months.
  • Proof of any out-of-pocket medical expenses.

non-streamlined partial payment

If you owe $50,000 or more and can make monthly payments to the IRS, a non-streamlined agreement is an option. The IRS will not automatically approve this agreement; instead, you must negotiate with the IRS. You must file Form 433-F, Collection Information Statement. This form collects information about income, debts, living expenses, assets, accounts, and allows you to propose an installment payment amount.

It will usually take a few months for the IRS to review a proposed payment plan. The IRS may refuse a proposed agreement if it considers some of your living expenses unnecessary, if untruthful information was provided, or if you failed to complete a prior installment arrangement.

The information that you will need to prepare in advance of your IA application include:

  • All income and living expenses.
  • All assets and their market values.
  • Bank statements from the last three months.
  • Proof of any out-of-pocket medical expenses.
If you are unable to pay a tax liability through a non-streamlined agreement, consider filing an Offer in Compromise.

 

Conclusion -Tax Debt Installment Agreement

The IRS has the right to review your account status for any reason at any time. Since you owe money to the IRS they have the right to determine if your financial situation has changed. Denying the IRS a request for a new collection information statement will increase their curiosity and should be avoided.

The tax debt Installment Agreement is a tax debt relief program where you can pay off your tax balance over time, but with stringent payment requirements.

Getting IRS approval for an non-streamlined IA is a challenging task. It is strongly recommended that you have professional advice and representation when dealing with the IRS.

An overview of tax debt installment agreement is presented. This includes 1) Guaranteed Installment Agreement; 2) Streamlined Installment Agreement; 3) Partial Payment Installment Agreement; and 6) Non-Streamlined Partial Payment Installment Agreement.

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