Installment Agreements for Individuals

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Written By Attorney Michelle Wynn on 2/21/17
If you owe money to the IRS, one method of resolving the tax balance due is to request a payment plan. This is the method most favored by the IRS… well, second to payment in full immediately.

An IRS monthly payment plan is called an “Installment Agreement.” An Installment Agreement with the IRS means that you pay a certain amount of money each month to put towards your tax liability. While you are making these payments, interest will continue to accrue as will failure-to-pay penalties. The IRS will also keep any income tax refunds that are due to you until the liability is paid in full.

There are many types of installment agreements with the IRS. But one rule is true for every one of these installment payment plan types, you must have filed all tax returns that you were required to file. If you have any unfiled tax returns within the past 6 years (and sometimes longer) the IRS will require that you file the returns before it will grant you an installment agreement.

It is also important to know that an installment agreement is not set in stone. If you agree to a payment plan and your financial situation changes later, you can modify the current payment plan or request a different type of resolution for your tax liability. On the flip side, while the IRS does not typically request a modification for most types of payment plans, it technically has the ability to do so or to request that you supply financial information to show that you continue to qualify for your payment plan amount.

Having an experienced tax attorney can help you know what option is best for you to resolve your tax debt, taking into account all of your goals and financial constraints. Using a tax lawyer can also help you navigate often overcomplicated rules about IRS allowable expenses and minimizing the amount you have to repay the IRS, if that is one of your goals.

The available types of Installment Agreements are:

Guaranteed Installment Agreement
If you:
- owe less than $10,000 in taxes, not including any interest or penalties,
- you have filed all of your tax returns for the past 5 years,
- you have not incurred any other tax liability for the past 5 years,
- you have not previously entered into a payment plan for a tax liability within the past 5 years, and
- you cannot afford to pay this tax liability in full, then the IRS will grant you a guaranteed installment agreement.

You must agree to a monthly payment plan that will pay off your tax debt within 3 years.






Streamlined Installment Agreement

There are actually 2 types of streamlined installment agreements for most people (see special note below):
           
For people with liabilities of $25,000 or less
If you have a tax debt of $25,000 or less, the IRS may grant you a Streamlined Installment Agreement where you do not have to provide any financial information to qualify for the payment plan.
The $25,000 limit applies to the taxes owed plus any posted interest or penalties, but not interest or penalties that have accrued but not “posted” to your “account.” The frequency of the IRS posting interest and penalties to any particular tax balance (referred to as an “account”) is impacted by various factors, is not typically on a set schedule, and cannot always be predicted.

In order to qualify for a Streamlined Installment Agreement, you must have not previously defaulted a prior Streamlined Installment Agreement. The payments must be set at an amount that will fully pay your tax liability over a period of 6 years or prior to 1 year before the IRS is no longer able to collect on your liability (referred to as the CSED, meaning “Collection Statute Expiration Date”), whichever comes sooner.

If you enter into a Streamlined Installment Agreement of this type before the IRS files a lien, and you agree to have the payments taken directly from your bank account (called a Direct Debit Installment Agreement) typically the IRS will not file a lien against you. If you enter into a Streamlined Installment Agreement of this type after the IRS already files a lien against you, you may qualify to have the lien withdrawn.

For people who owe between $25,001 and $50,000
If you have a tax debt of $50,000 or less, the IRS may grant you a Streamlined Installment Agreement, but you will have to show that you are able to afford your monthly payment amount. To prove this, you will have to submit a Collection Information Statement (either Form 433-A or Form 433-F ) to the IRS either on paper or verbally over the phone.
The $50,000 limit applies to the taxes owed plus any posted interest or penalties, but not interest or penalties that have accrued but not “posted” to your “account.” The frequency of the IRS posting interest and penalties to any particular tax balance (referred to as an “account”) is impacted by various factors, is not typically on a set schedule, and cannot always be predicted.

In order to qualify for a Streamlined Installment Agreement, you must have not previously defaulted a prior Streamlined Installment Agreement. You must also agree for the payments to be taken directly from your bank account each month (called a Direct Debit) or for the payments to be taken directly from your paycheck (called a Payroll Deduction Agreement). The payments must be set at an amount that will fully pay your tax liability over a period of 6 years or prior to 1 year before the IRS is no longer able to collect on your liability (referred to as the CSED, meaning “Collection Statute Expiration Date”), whichever comes sooner.

While this type of agreement does not provide the same protections against the IRS filing a lien or allow you to request a lien withdrawal the way that an Installment Agreement for less than $25,000 will, it does make it less likely that the IRS will not file a lien against you if it has not already done so.

            New IRS Test Procedure: From late 2016 through September 30, 2017,
the IRS is testing out an expanded Streamlined Installment Agreement program.
This expanded program will only be administered through certain IRS call centers,
not by Revenue Officers or by the online installment agreement.

During the test period, if you owe less than $50,000 and you request a Streamlined Installment Agreement and you agree to have your monthly payment taken directly from your bank account each month (called a Direct Debit Installment Agreement) or you agree to have your payment deducted directly from your paycheck (called a Payroll Deduction Agreement), the IRS will typically not file a tax lien against you if it has not already done so.

During the test period, if you owe between $50,001 and $100,000, the IRS will allow you to make an agreement under terms similar to those for the Streamlined Installment Agreement procedures already in place for lower tax liabilities. The IRS will not require you to provide detailed financial information if you agree to your monthly payments being made by Direct Debit or by a Payroll Deduction Agreement. You must agree to fully pay your tax liability within 7 years, or before the IRS is no longer able to collect on your liability (referred to as the CSED, meaning “Collection Statute Expiration Date”), whichever comes sooner. The IRS is still likely to file a tax lien if you enter into this type of agreement.






Partial Payment Installment Agreement

If you cannot afford to pay off your tax debt through one of the above methods, the IRS will consider placing you in a monthly payment plan with a payment that is not high enough to pay off your tax liability within the time the IRS has to collect your liability. In order to qualify for this type of payment plan, you must provide detailed financial information in the form of a Collection Information Statement (either a Form 433-A or Form 433-F ) provided either on paper or over the phone.

If you have substantial assets that you can liquidate to pay towards your tax liability, the IRS may try to get you to liquidate those assets.

Having an experienced tax lawyer can help you avoid paying more than you have to and can help you protect your assets where possible.




Installment Agreement

If your liabilities are higher than are allowed under the Streamlined Installment Agreement programs, or if you do not meet any of the other criteria for a Streamlined Installment Agreement, the IRS can still allow you to pay your tax debt with a monthly payment. You will have to provide detailed financial information in the form of a Collection Information Statement (either a Form 433-A or Form 433-F ) provided either on paper or over the phone.

If you have substantial assets that you can liquidate to pay towards your tax liability, the IRS may try to get you to liquidate those assets.

Even if you have a very high tax liability, it is still possible to get a monthly payment plan that you can afford, although you may have to be willing to adjust your current financial situation to find a solution that you can afford and the IRS will accept.

An experienced tax attorney can help you navigate the IRS’s often complex and changing rules to help you meet your goals.


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Click Here To Schedule A Free Consult To See If You Qualify
Click Here To Schedule A Free Consult To See If You Qualify