IRS Installment Agreements – Types of Installment Agreements
In our last blog post, we talked about IRS installment agreements. Just to recap, an IRS installment agreement is a monthly payment plan to pay taxes, interest, and penalties over time to the Internal Revenue Service. When you set up an installment agreement it means you will pay the total owed amount within the allotted time (which varies by payment plan type). This post picks up with the four common installment agreement types.
Guaranteed Installment Agreement
In order to qualify for a guaranteed installment agreement with the IRS, the taxpayer is required to meet the following terms:
- Owe the IRS less than $10,000, (not including interest and penalties)
- The liability of the agreement must be paid within three years
- Must have filed tax returns, paid any outstanding taxes due, and not have entered into a previous installment agreement with the IRS- all within the last five years
- The minimum monthly payments, including the tax liability, interest and penalties must be made
- Must be incapable of paying the tax amount when due or within 120 days of due date
Under the guaranteed installment agreement payment plan, the IRS will not file a federal tax lien against the taxpayer as long as the conditions above are maintained.
Streamlined Installment Agreement
Oftentimes, taxpayers who qualify for a guaranteed installment agreement will also qualify for the streamlined installment agreement. A streamlined installment agreement has the following requirements:
- The tax liability, interest, and penalties must not exceed a total of $50,000
- The total balance should be completely paid within 72 months
- The recommended fee is equal to or greater than the “minimum acceptable payment” (the minimum acceptable payment is the greater of $25 or the minimum payment amount reached by dividing the tax liability, interest, and outstanding penalties by 50)
There is a fee, to be paid by the taxpayer, to have the streamlined installment agreement set up. Paying by means of a direct debit will result in a reduction of that fee. For a restructure or to petition to reinstate a previous installment agreement, the IRS will charge a different, additional fee. Like a guaranteed installment agreement, as long as the conditions of the agreement are met, the IRS does not file a federal tax lien against the taxpayer.
Partial Payment Installment Agreement
The next type of installment agreement I will mention is the partial payment. Unlike the guaranteed and streamline installment agreements, a partial payment agreement (you guessed it) lets the IRS proceed with an agreement for a partial payment of the tax liability. In order to qualify for this type of payment arrangement, the taxpayer must fill out and file a financial statement using Form 433-F to report their full income and living expenses. The IRS will then assess this by reviewing, vetting, and ensuring the validity of this information. If there are assets available that can be sold to help pay a portion of the outstanding tax debt, the IRS will want to know that information as well before deciding.
If the partial payment installment agreement is reviewed and approved, the taxpayer will be obligated to take part in a financial review every two years of the life of the agreement.
Non-Streamlined Installment Agreement
Finally, we will review the non-streamlined installment agreement. In order to qualify for this type of installment agreement the taxpayer must owe $50,000 or more and be able to make monthly payments to the IRS. Even if these conditions are met, this is not an automatic approval. Instead, the taxpayer will need to negotiate the arrangement with the IRS. The taxpayer must file Form 433-F which asks for information about income, debts, assets, accounts, living expenses and allows the taxpayer to suggest a payment amount.
The non-streamlined installment agreement will likely take a couple of months for the IRS to review. The IRS could potentially refuse the taxpayers payment if they find that some of the information provided was false, they deem some of the debt and expenses as unnecessary or if the taxpayer is not in good standing on a previous installment agreement.
I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your unpaid taxes, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.