Installment Agreements
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.
There are 4 types of Installment agreements available through the IRS:
- 01. Guaranteed
- 02. Streamlined
- 03. Partial Payment
- 04. Non-Streamlined
Guaranteed
Installment Agreement
- You owe less than $10,000 (excluding penalties and interest)
- You have no existing installment agreement already,
- You have your total taxes owed settled and all of your tax returns files.
Streamlined
Installment Agreement
Most people who qualify for a Guaranteed Installment Agreement also qualify for a Streamlined Installment Agreement, but with a few added requirements:
- The liability, interest and penalties you owe do not exceed $50,000.
- You can pay the balance within 6 years (72months)
- Your proposed payment must be greater or equal to the minimum acceptable payment (calculated by dividing your liability, interest and penalties by 50).
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.
Partial Payment Installment 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.
Non-Streamlined Installment Agreement
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.
Installment
Payment methods
- Check/money order
- Credit card
- Debit card
- Electronic Federal Tax Payment System (EFTPS)
- Online Payment Agreement (OPA)
- Payroll deduction
Conditions for revocation of
an installment agreement
The IRS can cancel your agreement under the following conditions:
- You miss a payment
- You provide inaccurate information on Form 433-F
- You fail to pay your taxes or file a return despite a valid agreement
- You’re paying under a partial payment plan and a review indicates that your financial position has changed
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