If you are late paying your taxes, the IRS can hit you with a large tax bill. Owing the IRS money can be stressful. Fortunately, the IRS allows eligible taxpayers to resolve their tax debts with an IRS installment agreement.
There are four types of IRS installment agreements that offer relief for delinquent taxpayers who are not able to pay off their back taxes in a single payment.
Guaranteed Installment Agreement
A guaranteed installment agreement is designed for taxpayers who owe the IRS less than $10,000 in tax debt. Under a guaranteed agreement, the IRS will not file a federal tax lien against a delinquent taxpayer.
You have to meet the following requirements to qualify for a guaranteed installment agreement:
- Owe less than $10,000 in back taxes (before interest and penalties)
- Filed the previous five years’ tax returns
- Don’t have another installment agreement in the last five years
- Can pay the back taxes within three years
- Can pay the minimum monthly payment on time each month
Streamlined Installment Agreement
If you qualified for a guaranteed agreement, you will likely qualify for a streamlined installment agreement too. Streamlined agreements give you more time to pay. You have up to 72 months.
You qualify for a streamlined installment agreement if:
- Tax debt, interest, and penalties do not exceed $50,000
- Can pay the full amount within 72 months
- Proposed monthly payment is the greater of $25 or 2% of your tax debt
Partial Payment Installment Agreement (PPIA)
A PPIA allows you to enter into an agreement with the IRS for partial payments of your tax liability. The IRS may agree to this plan for taxpayers who demonstrate a severe financial hardship and cannot afford guaranteed or streamlined installment monthly minimum payments.
With a PPIA, you have more time to repay your tax debt while allowing the IRS to evaluate your financial situation every two years to determine whether it is improving. Unfortunately, with partial payment installment agreements, the IRS may file a tax lien to protect their interests in your properties and guarantee tax debt collection.
The following are the criteria to qualify:
- Complete Form 433-F (Collection Information Statement) to report income and living expenses
- IRS reviews and verifies the information you provide
- If IRS determines you have liquid assets that can be converted to settle some of the tax debt, the agency will ask for additional information
Non-Streamlined Installment Agreement
A non-streamlined installment agreement is an agreement that a delinquent taxpayer enters with the IRS to pay a tax debt in full when the liability is over $50,000. To qualify for this agreement, you must file Form 433-F to show your income, debts, assets, living expenses, and accounts. The IRS does not automatically approve the non-streamlined agreement; instead, you have to propose an appropriate installment payment amount.
The IRS takes a couple of months to review a proposed payment plan and approves or rejects it.
Typically, the IRS will refuse the proposed agreement under the following scenarios:
- If the IRS considers some of your living expenses are unnecessary
- If you provided inaccurate or untruthful information
- If you failed to complete a prior installment agreement
Do IRS Installment Agreements Help with Wage Garnishment, Bank Account Seizures, and Tax Liens?
Yes, IRS installment agreements can help with wage garnishment, bank account levies, and tax liens. For example, once the IRS approves your tax payment plan, your account is considered in good standing, and the wage garnishment stops.
This is true for bank account levies too. Similarly, the IRS will not file a lien if you are making installment agreement payments (except in the case of some PPIA’s).
If you’re having trouble paying your back taxes, consider an installment agreement with the IRS. If you are unsure which type of installment agreement is best for you, schedule a free call or take our quick, free evaluation online.
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