If you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement. The IRS has four different types of installment agreements: guaranteed, streamlined, partial payment, and non-streamlined.
nt agreementGuaranteed Installment Agreement
The most common of the options is the guaranteed installment agreement. To qualify for this, the taxpayer must owe less than $10,000, have filed their tax returns for the previous five years, the taxpayer is unable to pay the tax liability when due, and the taxpayer must be able to pay the minimum balance and pay the balance off within three years.
Streamlined Installment Agreement
Usually if a tax payer qualifies for a guaranteed agreement, they also qualify for a streamlined installment agreement. To qualify for the streamlined installment agreement, the taxpayer must have tax liability, interest, and penalties do not exceed $25,000, be able to pay the balance off within 60 months, and the taxpayer must pay a fee of $105 to set up the installment agreement or $52 for a direct debit installment agreement.
Partial Payment Installment Agreement
The third option is a partial payment installment agreement. A partial payment agreement allows the IRS to enter into agreements with taxpayers for the partial payment of a tax liability. To qualify for this arrangement, the taxpayer must complete a financial statement using Form 433-F to report income and living expenses. The IRS will review and verify the information. If the taxpayer has assets that can be sold to pay some of the tax debt, the IRS will require the taxpayer to provide additional information.
Non-streamlined Agreement
If a taxpayer owes $25,000 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, the taxpayer must negotiate with the IRS. The taxpayer must file Form 433-F, Collection Information Statement. This form collects information about income, debts, living expenses, assets, accounts, and allows the taxpayer to propose an installment payment amount.
Can IRS refuse a prposed agreement?
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 the taxpayer’s living expenses unnecessary, if untruthful information was provided, or if the taxpayer failed to complete a prior installment arrangement. If a taxpayer is unable to pay a tax liability through a non-streamlined agreement, consider filing an Offer in Compromise.
How to set up your payment plan?
The IRS can set up your payment plan through payroll deductions, direct debit, check or money order, Electronic Federal Tax Payment System (EFTPS), credit card, or online payment agreement (OPA).
Can IRS revoke an installment argeement?
Yes, the IRS can revoke an installment agreement under certain circumstances. These conditions are if the taxpayer misses a payment, the taxpayer does not file a tax return or pay taxes after the agreement is entered into, the taxpayer provided inaccurate information on Form 433-F, or the taxpayer is paying under a partial payment installment agreement and a review indicates a change in their financial position.
If you want to apply for or know more information about installment agreements, please contact us at 877-305-4743 to schedule a initial consultation today.