Understanding IRS Installment Agreements

The IRS recommends individuals pay their tax debts in full to avoid further fees. The IRS permits taxpayers who are unable to pay their tax bills immediately to make monthly payments through an installment agreement, which is characterized as an option for people who must address their federal tax liability. Penalties and interests still accrue when taxpayers choose the installment agreement option.

Guaranteed Installment Agreement

A guaranteed installment agreement is available to you if you owe $10,000 or less to the IRS and meet all of the following criteria:

• File all past tax returns.
• Your previous five years’ returns may not have been filed or paid late.
• You can’t have used an installment agreement plan within the previous five years.
• You can pay the entire amount within three years or less or by the collection statute expiration date (CSED).

The IRS does not file a federal tax lien against taxpayers for outstanding dues under this guaranteed installment agreement.

Streamlined Installment Agreement

A streamlined installment agreement is available to you if you owe $50,000 or less to the IRS and meet the following qualifications, courtesy of the IRS Fresh Start Program:

• You can fully pay your tax debt within 6 years (72 months) or by the collection statute expiration date (CSED) whichever comes first.
• You have owed all taxes and haven’t set up an installment agreement in the last 5 years.

The IRS does not file a federal tax lien in a streamlined installment agreement, as it would in a guaranteed installment agreement.

Regular Installment Agreement

In the regular installment agreement, the IRS will require taxpayers to provide financial information because now, this is where taxpayers start owing some serious amount of money, $50,000 or more in tax debt.

The regular installment agreement is going to be more work than the guaranteed installment agreement and streamlined installment agreement. You’ll need to have proof such as bank statements, receipts, contracts, etc. so you’re able to fill out forms to help disclose all your assets, liabilities, income, and expenses.

Partial Payment Installment Agreement

Taxpayers are always encouraged to pay all their tax liabilities in full but sometimes that’s not the case for everyone. The partial payment installment agreement is where you pay only a partial payment of your tax debts. There’s no set tax debt for this partial payment installment agreement which makes it a bit more difficult to qualify for.

Every two years, the IRS will be evaluating your financial position to see if your situation has improved or not. During this time, the IRS, unlike the guaranteed installment agreement and the streamlined installment agreement, will be filing a federal tax lien to guarantee tax debt collection.

Overview

If you end up filing late and missing your payment deadlines, your tax debt will continue to grow since penalties and interest continue to accrue on your tax debt, and we don’t want that right? No taxpayer in their right mind wants to owe money to the IRS especially if it becomes a struggle to pay off. It is very important for taxpayers to remain tax compliant because it will save you interest and penalties on the current year and prevent you from a continuous circle of always owing tax.

The IRS Fresh Start Program consists of 4 main programs that are accessible to taxpayers who owe much more than they can reasonably afford to pay. The four major programs are as follows:

• Currently Not Collectible (CNC)
• Offer In Compromise (OIC)
• Installment Agreement (IA)
• Penalty Abatement (PA)

These relief programs allow qualified taxpayers the option to reduce or even eliminate their tax liabilities. These tax experts will help you qualify for the program and help you figure out which options will give you the most suitable outcome.