Introduction to Installment Agreements
Installment agreements can be an excellent tool for you if you owe more than you can pay right now. There are several types of installment agreements, and each one has its requirements and offers different benefits. Let’s look at each one.
A streamlined agreement is available to taxpayers that owe less than $50,000. Under this agreement, the taxpayer may be able to spread out payments over 72 months, but that is not always possible. First, the taxpayer must be current with all required tax returns. Second, the number of months you can extend payments is limited by the statute of limitations related to the debt. The IRS generally has ten years to collect a tax debt. Suppose eight years have already passed, leaving only two more. In that case, the IRS will require the installment agreement to be completed in those remaining two years, cutting the allowable time down from 72 months to a mere 24 months. Much like the name, the application and documentation are streamlined, allowing for a faster and easier process for most taxpayers.
If you owe less than $50,000 but more than $25,000, you may have to provide additional financial information to obtain approval via a form 433-A.
A guaranteed agreement is only available to those that owe less than $10,000 in total income tax, excluding penalties and interest. Under this type of arrangement, the payments will be spread out over 36 months. Again you must be within the collection period. In addition to the limitation on the amount owed, the taxpayer is not eligible if they have utilized another installment agreement in the last five years. The previous five tax returns must have been filed and paid.
This is generally the most restrictive agreement available but has the benefit of being guaranteed if the taxpayer meets all the qualifications. Under both the streamlined program and the guaranteed agreement, the IRS will not file a federal tax lien on the taxpayer if the payments are being made.
If the taxpayer owes between $50,000 and $250,000, they may be eligible for the Non-streamlined Installment Agreement plan (NSIA). The NSIA was introduced in 2020 and replaced the expanded installment agreement program. Under the NSIA program, individuals (not companies) that owe between $50,000 and $250,000 and are not currently assigned to a collections officer may be eligible. Unlike the other two plans, more information has to be disclosed, especially if you have defaulted on a payment plan in the past. Additionally, you must apply for this plan in writing and get the approval of an IRS manager.
What about large tax debts?
If you owe more than $250,000, you will need to work directly with a field collection officer to develop a plan that will be approved based on your situation and finances.
If you have an outstanding tax debt and think an installment agreement may be the right solution, contact us to see which option is the best for you and how to get started.