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IRS Installment Agreements
If you have an IRS tax debt that you cannot pay in the short-term, a long-term payment plan may be right for you.
An IRS payment plan or installment agreement allows you to repay your tax debt over an extended period. If your assets or income rule out an Offer in Compromise, or Currently not Collectible status, an installment agreement may be the best option to eliminate your tax debt.
If you arrange a payment plan proactively, you can reduce the interest and penalties that accrue on IRS tax debt. Perhaps more importantly, you can avoid unpredictable and debilitating IRS collection actions, such as wage and bank levies.
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Types of IRS Installment Agreements
There are four main types of IRS installment plans available to individuals. The IRS updates the requirements and criteria for payment plans periodically, and these are current as of 2018.
Guaranteed Installment Agreements are appropriate for individuals with back tax debts of $10,000 or less, not including penalties and interest. Guaranteed agreements are automatically approved if you meet the criteria and can afford a minimum monthly payment of the total balance due, divided by 36 months. Guaranteed installments must be paid off at the end of the three-year term or before the 10-year statute of limitations expires. The IRS will not file a lien if you have a guaranteed installment agreement.
Streamlined Installment Agreements have been extended to individual taxpayers who owe $100,000 or less, including penalties and interest. As part of the IRS “Fresh Start Program”, you are not required to make full financial disclosure to secure a streamlined agreement. The repayment term for a streamlined agreement is up to 72 months (6 years). However, 84-month repayment terms are currently available, with conditions. As with the guaranteed agreement, you are protected from a federal tax lien while in a streamlined installment agreement. For debts over $50,000, however, you must arrange direct debit payments or a payroll deduction to avoid a lien.
Non-Streamlined Installment Agreements (Financially Verified Installment Agreements) apply to taxpayers who a) owe more than $100,000 or b) owe over $50,000 but choose not to pay by direct debit or payroll deduction. Unlike guaranteed and streamlined agreements, these agreements cannot be automatically approved. The repayment term isn’t pre-determined and can be negotiated. If you have a non-streamlined installment agreement, it is likely that the IRS will file a lien to protect their claim.
Partial Payment Installment Agreements are also negotiated, rather than automatically approved. These installment agreements are for taxpayers who cannot afford to pay their full debt within the timelines set out by the other agreements. The monthly payment is based on proven affordability. Under the terms of these agreements, the IRS may file a federal tax lien and they will re-evaluate your case every two years.
Different IRS payment plans are available to businesses. If your business owes back taxes, you may be eligible for one of the following:
Business installment plans entail criteria, repayment terms, thresholds and requirements that differ from individual plans. For more information, request a free consultation with Precision Tax Relief.
IRS Payment Agreement Eligibility
The IRS would prefer to recover your debt through installment payments than not at all. In recent years, they have reduced barriers to approval of payment plans.
For smaller debts, application is comparatively straightforward and there can be little to no financial disclosure required. For higher debts, the IRS will demand more information on your financial situation and seek greater guarantees of your ability to pay.
The most scrutiny will be applied if you are seeking a partial payment installment agreement, because of the extended repayment term and reduced monthly installments. For an IRS partial payment plan, you must prove that you are unable to pay more through equity or future income.
In general, the criteria for an individual IRS installment agreement are as follows:
When you work with Precision Tax Relief, we will expertly analyze your financial position to recommend and negotiate an affordable IRS payment plan. Our clients trust us to work for their best interests. That’s why we have a 98% satisfaction rating in more than 700 reviews — more than any other tax relief agency.
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FAQs on IRS Installment Agreements
What is the difference between an installment agreement, a settlement and IRS Currently Not Collectible status?
An installment agreement is one way to secure relief from IRS collections. When you have a payment plan, the IRS will typically not levy your wages, bank account or other assets. You may also be eligible to have a federal tax lien removed when you enter an installment agreement.
An IRS installment agreement may be right for you if:
- You have been rejected for an Offer in Compromise;
- You cannot pay your IRS tax debt in the short term (less than 120 days), either from existing assets or by taking out a loan with a lower interest rate than your federal tax debt;
- You can afford to make monthly payments.
Most taxpayers would prefer an Offer in Compromise, which reduces the total amount of IRS tax debt owed. With an installment agreement, your debt is not reduced, and you continue to accumulate interest on the balance.
An installment agreement also reduces your disposable income over multiple months or years. If paying installments would create financial hardship, you may be eligible for Currently not Collectible status.
The majority of taxpayers are eligible for an installment agreement. A wide range of installment agreements exist so that taxpayers have options to satisfy their IRS tax debts. Review the criteria listed above to see if you are eligible. You can also call Precision Tax Relief for a free consultation and no-obligations advice.
There are four broad types of IRS payment plans available to individuals. The right agreement for you depends on the amount you owe and what you can pay. A tax professional can steer you towards the right IRS payment agreement.
Yes. The IRS offers four different installment plans for businesses. There are unique thresholds, repayment terms, requirements and criteria associated with each business payment plan type. Please reach out to us with questions on IRS payment plans for businesses.
The Collection Statute Expiration Date (CSED) is the date on which the IRS can no longer legally seek to collect back tax debts. It is also known as the statute of limitations on IRS collections. If you reach the CSED on your debt, the liability is cleared, and you no longer owe the IRS.
The CSED is 10 years from the date the tax debt was assessed, but the clock on the statute can be stopped in a variety of scenarios: filing of bankruptcy, a submission of an Offer in Compromise or an appeal to the IRS can suspend the running of the CSED. The clock does continue ticking, however, while you have an installment agreement.
Some taxpayers will reach their CSED before they have completely paid off their debt through installments. This is more common when you have a partial payment installment agreement.
The IRS will take your CSED into considering when you apply for an installment agreement. Naturally, they will seek to collect as much of the back tax debt as possible through installment payments before the statute of limitations expires. The IRS may only approve an installment agreement with a repayment term that is shorter than the remaining time before your CSED. Or, the IRS may require that you sign a waiver to extend the date of the CSED, before approving an installment agreement.
When you work with Precision Tax Relief, we will determine your CSED and factor that date into our recommendations.
The IRS will approve an installment agreement without requiring payment from assets if you demonstrate that the monthly installments will satisfy your debt in full.
Partial payment installment agreements are an exception. These agreements are riskier for the IRS because you pay a lower monthly amount over a longer term. The IRS may forfeit the ability to recover your debt if you have not paid in full by the 10-year statute of limitations (CSED) deadline. For this reason, if you are applying for a partial payment installment agreement, you will need to prove that you cannot pay more by liquidating assets.
The application process varies depending on the type of installment agreement.
A licensed tax relief professional can help you file, and there are several advantages to getting expert help. At Precision Tax Relief, our IRS back tax experts will determine the most suitable installment agreement for your financial situation. We will propose an affordable monthly payment plan, minimizing penalties and interest while satisfying the requirements of the IRS.
If you choose to apply yourself, you can use the IRS Online Payment Agreement (OPA), call the IRS, or mail in your forms.
Yes. When you enter a payment plan with the IRS, there are conditions attached. You must make the regular installment payments, file and pay current year taxes by the deadline. The IRS can terminate the agreement if you have not met these conditions.
Also, if your income increases, the IRS may request a new financial statement and higher monthly payments.
You will receive notice and an opportunity to appeal before the IRS terminates your installment agreement. If you receive notice, secure professional tax services.
An IRS review of an installment agreement is not unusual. The IRS is required to review certain installment agreements periodically. If you have a partial pay agreement, they may be seeking proof that you still qualify for these reduced payments.
Typically, you will have to submit new Collection Information Statement forms, updating the IRS on your financial situation. You may also need to renegotiate the terms of your installment agreement.
The notice from the IRS will included a deadline — typically 10 days. To gather current financial information and make the best possible case, you may need to request an extension from the IRS. While extensions are available, it is important to act right away when you receive notice, to avoid missing the deadline. Failing to respond to the notice could trigger a notice of intent to terminate your installment agreement.
You can request a short-term break in your monthly payments, if necessary. The IRS usually approves a one-month reprieve, which may be all you need to cover unexpected expenses or restore your income.
What if a month off isn’t enough? If you anticipate higher ongoing expenses or if your income has been indefinitely reduced, you may need to request a long-term reduction in payments or Currently not Collectible status.
You will be required to submit new collection information forms and the IRS will demand proof of the new expenses or changed income.
If you don’t request and secure an approved reprieve in payments, the IRS will send you notice of intent to terminate your agreement after one missed installment.
When you miss an installment agreement, it triggers a notice from the IRS. Failing to comply with tax filing requirements can also trigger this notice.
The notice is not an immediate cancellation of your agreement. It gives you 30 days to appeal and renegotiate the payment plan, after which the IRS can legally terminate the installment agreement. Act quickly to protect your installment agreement!
Yes, the IRS will keep your tax refund and automatically apply it against the taxes you owe. This is one of the conditions of an installment agreement.
The refund the IRS applies to your debt does not change your monthly payments. Continue to make these as per your agreement.
There is one exception: if your tax refund exceeds your total balance due on all outstanding liabilities, you will receive a refund of the amount over and above what you owe.
If you have a payment plan with the IRS, you are protected by law and it is IRS policy not to levy. However, mistakes do happen. Sometimes an automatic levy is triggered through an error in the system.
If this happens to you, call Precision Tax Relief for help or contact the IRS Office of the Taxpayer Advocate.
In some cases, yes.
If you are an individual with an installment agreement, you can request that the IRS withdraw a federal tax lien on a debt of $50,000 or less. Typically, you must pay the installments by direct debit and make a series of three payments before the IRS will comply.
The IRS can apply a federal tax lien if the debt balance is more than $50,000 or if you reject repayment by direct debit or payroll deduction installments on a back tax balance between $25,000 and $50,000.
If you need help negotiating the installment agreement and/or a withdrawal of the lien, we can help.
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