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Types of IRS Installment Agreements for Your Tax Debt Solution

The stress of delinquent IRS tax debt can be overwhelming at times. While it’s tempting to run and hide, the best way to get collectors off your back is to pay tax debt in a timely fashion. But what about when you can’t realistically settle the debt with a single lump sum? In these situations, an installment agreement may be just what the doctor ordered. irs installment agreements

Types of Installment Agreements

The IRS, for all the negative press it gets and the common perception that it’s a greedy, compassion less institution, is sympathetic in certain situations. The IRS wants its money and is willing to work with you to get the amount in full. Because they understand some people cannot pay the full amount with one stroke of the pen, they offer “installment agreements”. Installment agreements are specific arrangements in which taxpayers can pay liabilities over a period of time. This spreads payments out and reduces the financial burden of having to produce large sums of money in a short period of time. The challenging part for many individuals is not actually applying for an installment agreement, but choosing which installment agreement to pursue. The IRS offers four different options, including guaranteed, streamlined, partial payment, and non-streamlined.

Guaranteed Installment Agreements

If your balance is $10,000 or less and you meet certain criteria, the IRS is required to agree to an installment plan. In addition to owing a particular amount, taxpayers must check off on the following:

  • Over the past five years, you haven’t filed or paid late.
  • All of your tax returns are appropriately filed.
  • You haven’t applied for an installment agreement in the past five years.
  • Your monthly installment payments will settle your debt balance in three years or less.
  • You are willing to sign an agreement stating you will file and pay on time in future tax years.

A guaranteed installment agreement is most often preferred for delinquent taxpayers. The biggest benefit is that the IRS cannot file a federal tax lien. Your minimum monthly payment will be the total amount owed (including all penalties and interest) divided by the number of months the IRS agrees upon for the installment plan. For example, if you owe $8,000 and the IRS tells you to repay it within 30 months your minimum monthly payment would be $266.66.

Streamlined Installment Agreements

If you don’t meet the criteria for a guaranteed installment agreement, a streamlined installment agreement is the next best thing. In this case, you must owe a balance of $25,000 or less and agree to pay it off within 60 months. Additionally, if your balance is set to expire under the 10 year statute of limitations, the IRS can require full payment within the time leading up to this deadline. As of March 7, 2012, the IRS agreed to extend installment agreement plans to those owing $50,000 or less and willing to pay off the balance within 72 months. This is part of the IRS’s “Fresh Start Initiative” and is a welcome expansion for many laden with tax debt. Again, the major benefit here is that the IRS will not file a federal tax lien, which will be reported to the credit bureaus.

Partial Payment Installment Agreement

The most flexible option – though it permits the IRS to file a federal tax lien – may be a partial payment installment agreement. Under this type of repayment plan, the minimum monthly payment is calculated based on how much you can afford. It also permits longer repayment terms that extend beyond 72 months. However, unlike other plans, the IRS is allowed to regularly re-evaluate the terms and increase monthly minimums based on your ability to pay more.

Non-Streamlined Installment Agreements

If none of the pre-established plans work in your situation, a non-streamlined installment agreement may need to be negotiated. In this situation, you will be required to directly negotiate terms with an IRS agent. You will be asked to provide a financial statement for review, among other requirements. Additionally, the IRS can legally ask you to take out a bank loan, home equity loan, or sell non-essential assets.

IRS Tax Debt Help

Delinquent IRS tax debt is difficult to deal with. Whether you believe you will qualify for a guaranteed installment agreement or need help negotiating a non-streamlined plan, it’s important to get professional help. These situations can be tricky and often require expert help. When you use a tax professional, they can legally speak on your behalf and help you decide the best course of action.

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IRS Installment Payment Plans with Tax Experts Help

You may have the financial ability pay off your tax debts, but maybe not all at once. No need to worry – there’s a way to eliminate back taxes through IRS installment payment plans. Instead of paying a large amount of money at once, you can pay smaller amount every month, depending on your financial situation.

Installment Payment

Paying off your taxes with an installment payment plan might include penalties and interest. Depending on how much you owe to the IRS, you might be able to apply online or by mail. The fees are as follows:

Installment payment plans can be a lifesaver. Sometimes people come upon financial hardship, and the IRS has provisions to make paying back tax debts easier. Before applying for an installment payment plan, however, it is wise to ask for a short term extension, which grants extra time to pay back taxes.

Types of Installment Payment Agreement Online

The Online Payment Agreement (OPA) makes applying for installment payment plans simple. It can be done online in 3 easy steps. The IRS only accepts requests for installment payment plans if:

  • You don’t owe more than $10,000 in taxes
  • You have filed and paid your tax returns on time for the past 5 years
  • You agree to settle your debts within 30 days
  • You agree to comply with all tax laws of the time
  • You furnish the IRS with all relevant information without hiding anything
  • The IRS thinks you have a genuine case and that you really can’t pay your taxes as a lump sum without financial hardship

There are also plans for small businesses to pay back tax debts in installments, but it is usually much more difficult to get approval. In this situation, it is wise to hire a certified tax professional who knows everything about the tax code. You must meet specific conditions for each type of plan. Your IRS tax account must be in good standing, and you must have a genuine financial need at specific levels of tax debt.

Contact us at Long Island Tax Resolution Services today to keep you on the optimal path for your installment payment plan. We can help you get the most out of your plan and pay off your back taxes with minimum stress.

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IRS Installment Agreement Plans

If possible, the taxpayer should pay taxes as they come due, to avoid unnecessary penalties and interest charges. If this isn’t possible, the IRS has various payment plans that may better fit the taxpayer’s circumstances known as installment plans. The IRS designed installment plans for taxpayers to relieve their tax debt without becoming financially devastated. Depending on your financial circumstances, the IRS could demand a large up front payment. In the installment plan the taxpayer negotiates a monthly payment that simultaneously lessens financial hardship while reducing the tax debt as rapidly as possible to minimize interest and penalties. Working with a tax resolution consultant can help you choose one of the following installment plans that works best for you.

Short-Term Installment Agreement

When using this strategy you seek up to 120 days after the April 15 deadline to resolve your debt. The IRS considers this extension an administrative decision. Therefore eligibility requirements aren’t clearly defined. Your filed petition to IRS will only be approved under certain conditions. Total tax debt must be less than $10,000. And the taxpayer has no other tax debt and has filed all tax returns.

Guaranteed Installment Agreement

This agreement is difficult to get. The IRS guarantees it as long as the taxpayer meets its requirements. The taxpayer must owe $10,000 or less and pay the tax debt within 36 months.

Streamlined Installment Agreement

This agreement is the easiest to get and does not need full financial disclosure. The taxpayer must owe $25,000 or less and must pay the tax debt within 60 months.

Verified Installment Agreement

This agreement is also difficult to get. The IRS wants extra paper work and full financial disclosure. This plan is available to those taxpayers who owe over $25,000 in tax debt or who meet cannot the higher monthly payment needed under the streamlined installment agreement.

Partial Payment Installment Agreement

This installment plan is also difficult to get. This agreement allows the taxpayer to pay less than the total tax debt owed over a stated period of time.  The taxpayer is again subject to full financial disclosure.

Long-Term Installment Agreement

The IRS designed this agreement for taxpayers unable to meet monthly bills. The taxpayer can pay the tax debt over a longer period than available in other plans. Long-term payment plans can last up to the 10-year statue of limitations on collecting tax debt.