So you’ve received the notice that every taxpayer dreads: You owe the government money! Fortunately, the IRS allows qualified taxpayers to repay their debts through an IRS installment agreements.
Being hit with a large tax bill can be stressful, especially if you’re unfamiliar with the repayment options available. While the IRS always prefers that you pay your taxes on time, it does offer solutions for repaying IRS back taxes.
To help you understand the best plan for you, we’ll cover the different types of installment agreements available, their terms, and who qualifies for these IRS payment plans.
What is an Installment Agreement?
An IRS installment agreement is one of the easiest and most popular methods to pay back an old debt. It allows you to pay back your tax debt with monthly payments.
These IRS payment plans grant you an extended timeframe to avoid tax levies, but tax penalties and interest will continue to accrue on your debt until the balance has been paid in full.
If you believe you can pay off your tax debt with a little more time, an installment agreement may be suitable for you!
Types of Installment Agreements
It’s a relief to know you have options to repay tax debt, but it’s important to understand which type of installment agreement works best for you. The answer depends heavily on how much debt you have and how much time you’d need to repay it in full.
Guaranteed Installment Agreements
The IRS must accept qualifying requests for installment agreements if you meet the following requirements:
- You owe $10,000 or less
- You have filed on time for the last 5 years
- You haven’t had an installment agreement in the last 5 years
- You can pay the total balance within 72 months or by the collection statute expiration date
One of the significant benefits of this agreement is that it prevents the IRS from placing a federal lien or levy against you for your outstanding debt. Taxpayers are also not required to provide additional financial information if their balance is $10,000 or less.
IRS Streamlined Installment Agreement
If you qualify for a guaranteed installment agreement, odds are you also qualify for the streamlined installment agreements offered by the IRS.
These are the requirements for a streamlined installment agreement:
- You owe $50,000 or less
- The total balance can be paid within 72 months
- The proposed monthly payment is equal to or greater than the minimum acceptable payment
What is the minimum acceptable payment?
The IRS determines your minimum payment by dividing the total balance owed by 72 months. If your collection statute expiration date is sooner than that, the IRS will divide the debt by the number of months you have left to pay.
Example: John owes the IRS $35,000 for the previous tax year.
$35,000 (amount owed) ÷ 72 months = $486 per month
John’s minimum acceptable payment would be $486.
Partial Payment Installment Agreement (PPIA)
If you are in a position where you have very little disposable income, don’t worry, there’s a plan for you!
Typically, IRS partial payment plans benefit low-income individuals for various reasons. It allows you to remain in good standing with the IRS by making smaller monthly payments based on your ability to pay. Unlike the previous installment agreement options, you must provide additional financial information for approval.
To qualify, you must file Form 433-F (Collection Information Statement) to report your income and living expenses. The IRS checks to see if you have any assets which can help pay off the bulk of your debt and may request additional information.
While this IRS payment plan can be a great option, if approved, you are required to submit financial information every 2 years, which can result in increased monthly payments. Payments on a PPIA continues until the balance is paid in full or the balance expires due to the CSED.
If you think a PPIA may be right for you, we recommend speaking with one of our award-winning tax debt attorneys to help you reach the lowest monthly payment possible!
Non-Streamlined Installment Agreement
If you owe up to $250,000 and can make monthly payments, a non-streamlined installment agreement may be right for you. Unlike some other options, this installment agreement isn’t automatically guaranteed. It’s also only available for individuals; businesses do not qualify for IRS non-streamlined installment agreements. The IRS will also file a Notice of Tax Lien as a condition of the agreement.
If you want to avoid an IRS lien, you may consider paying off part of your debt so that you can qualify for a streamlined installment agreement instead.
How to Make Installment Agreement Payments
There are several options available for you to make your monthly payments to the IRS.
Installment agreement payments can be submitted via:
- Direct debit
- Credit card
- Payroll deduction
- Check or money order
- Online Payment Agreements (OPA)
- Electronic Federal Tax Payment System (EFTPS)
Can the IRS Revoke an Installment Agreement?
Once you’ve entered an installment agreement with the IRS, you’re expected to make each payment on time. If you don’t, the IRS may terminate your payment plan.
The IRS may terminate an installment agreement for the following reasons:
- You missed a payment
- You fail to file tax returns on time or pay taxes timely after the agreement was entered
- The information provided on Form 433-F was inaccurate
- You are under a partial payment installment agreement and your financial situation has changed
If you aren’t meeting all the conditions of your installment agreement, the IRS will notify you in writing and provide 30 days for you to comply.
Need Help with IRS Installment Agreements? Call Gordon Law Group!
The burden of tax debt can be lonely, but we’re here for you! Thousands of Americans enter installment agreements every year to recover from tax debt. We’ve helped countless clients find the road to recovery, and we can do the same for you!
If you aren’t sure which installment agreement will be the right fit for you, or if you want to explore other tax debt relief options, contact Gordon Law Group today!
