IRS Installment Agreements

Installment agreements are just what they sound like. They are agreements between the IRS and the taxpayer that allow the taxpayer to pay their taxes over a period of time.

There are several different variations of installment agreements. This includes guaranteed installment agreements, streamlined installment agreements, and partial payment installment agreements. The IRS charges a fee to enter into these agreements, and the fee has changed several times over the years.

Guaranteed Installment Agreements

Guaranteed installment agreements can help individual taxpayers who have small balances. This type of installment agreement applies if the taxpayer owns $10,000 or less (not including penalties or interest). To qualify the taxpayer has to have filed all prior tax returns for the prior five years and paid all taxes due thereon, not entered into a prior installment agreement, and agree to pay the entire balance within three years.

Streamlined Installment Agreements

Streamlined installment agreements can help those who cannot qualify for a guaranteed installment agreement due to the amount of their balances. This type of agreement may be obtained by paying the tax debt down to be under the threshold. The threshold is $50,000 or less.

The threshold for streamlined installment agreements was increased from $25,000 or less to $50,000 or less under the IRS’s “Fresh Start Initiative.” However, the requirements are slightly different for amounts of $25,000 or less versus amounts between $25,001 and $50,000.


Partial Pay Installment Agreements

The partial pay installment agreement is often the preferred agreement. Partial payment installment agreements were allowed by the American Jobs Creation Act of 2004. It allows the taxpayer to avoid fully paying the tax debt.

With partial pay installment agreements, the Taxpayer must agree to pay the maximum monthly payment amount based on the Taxpayer’s ability to pay. This requires an analysis of the taxpayer’s reasonable collection potential under the IRS’s guidelines.

In order to qualify, a Taxpayer must be in compliance with filing, withholding, federal tax deposits, and estimated tax payment requirements.

Penalties & Interest Continue to Accrue

While installment agreements can be an excellent way to manage tax debts, they can be problematic in some cases. During the period of the installment agreement, penalties and interest continue to accrue. So a taxpayer could find themselves owing way more under the agreement than they would if they had simply paid the balance off.

This is why it is often advisable for taxpayers to negotiate the lowest monthly payment plan possible, and make payments in excess of the scheduled installments to pay off the debt sooner. The taxpayer can also propose an installment agreement in excess of their reasonable collection potential.

The IRS will often file a lien notice before entering into an installment agreement. But the IRS is not required to issue a lien notice, so taxpayers may push back when the IRS says that the lien notice is required.

Requesting Installment Agreements

Note that a taxpayer will not qualify for an installment agreement if he or she is not current on all tax filings. For many taxpayers, the first step is to go back and file all misting tax returns. If the taxpayer has not filed for several years, the IRS will typically require at least six years worth of tax returns on file.

Depending on the amount due and the status of the case, the taxpayer may be able to submit the installment agreement request online. But if the balance is larger, the taxpayer is a business, or a revenue officer is assigned to the case, the taxpayer generally cannot use the online system. They will have to work with the IRS over the phone or talk to the IRS revenue officer.

The IRS may reject the proposed installment agreement but generally cannot do so if the amount will pay off the tax debt.

We Can Help With Your Tax Debt

An experienced tax attorney can help ensure that the IRS and states follow these rules and that the rules are used to your benefit rather than your detriment.

If your case is in collections you need to speak to an experienced tax attorney.

Please call us at (713) 909-4906 or schedule an appointment to discuss your tax debt.

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