Taxpayers also may have the option to pay off their taxes owed in an Installment Agreement which is a long-term repayment plan. While an immediate one-time payment is still the best way to go because it doesn't incur interest and penalties, paying in full isn't always an option for everyone. If this is the case for you and you don't qualify for an offer in Compromise, an Installment Agreement can be a great alternative.
To qualify for a Guaranteed Installment Agreement, the following must apply:
Note: If you're unable to settle your liability in 120 days or when due, then you must be ready to pay off the liability in three years. You must also be prepared to offer at least the minimum monthly payment.
Most people who qualify for a Guaranteed Installment Agreement also qualify for a Streamlined Installment Agreement, but with a few added requirements:
Note: The IRS won't file a federal tax lien (similar to guaranteed) as long as the taxpayer covers a fee in order to set up their agreement.
A Partial Payment Installment Agreement allows the IRS to make arrangements with taxpayers to begin partial payments on their tax liability. This is going to be the legally agreed on amount between the taxpayer and IRS. First, you'll need to complete a financial statement in accordance with Form 433-F to record your income and living expenses. The IRS will then review and verify your information. If you have assets that can be sold to pay off your debt, the IRS is going to require additional information from you. Once approved, you must agree to a financial review every two years until the payment is complete. Financial reviews can potentially cause your monthly payments to increase. It can also result in the agreement being terminated, but only if the IRS determines that you're earning enough to pay your taxes off in full.
If you owe the IRS more than $50,000 and can make monthly payments on time, a Non-Streamlined agreement is another good option with no qualifying conditions. With a Non-Streamlined Installment Agreement, you, the taxpayer, are entering into negotiations with the IRS. You'll be filing a
Form 433-F and proposing an installment payment amount that you can afford. The IRS can then approve or refuse your offer.
The IRS can cancel your agreement under the following conditions:
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