Investigating an Installment Agreement: Is This an Option for You?
An installment agreement is very much like a monthly payment plan that you have for all of your credit cards.
If you cannot pay your debt to the IRS immediately, you can request that you be allowed to pay your debt over time using a monthly payment plan.
Conditions for Automatic Approval
The IRS is required to grant you a guaranteed installment agreement if the following conditions are met:
- Your balance is less than $10,000.
- You have filed (and paid) your taxes on time for the last 5 years.
- All of your tax returns have been filed.
- Your debt will be paid off within 3 years.
- You have not had another installment agreement in the last 5 years.
- You agree to file in the future and make your payments on time.
A guaranteed installment agreement does not require a federal tax lien, which are reported to credit agencies and significantly impact your credit score.
To understand whether an installment agreement is a viable option for your specific tax situation, it is also important to know about the 3 additional types of agreements:
- Streamlined Installment Agreements:
The terms of streamlined installment agreements have recently been expanded by the IRS. Now, if your tax debt is less than $50,000 and you can pay this amount off within 72 months, you will likely qualify for a streamlined installment agreement. A federal tax lien is not required for a streamlined agreement and you are not required to fill out a financial statement in order to qualify.
- Partial Payment Installment Agreements:
If you can prove that you are unable to pay the monthly payments of a streamlined agreement, you may be able to negotiate for a partial payment installment agreement. In these cases, your monthly payment is calculated based on what you can afford. You will need to complete a financial statement as well as provide bank statements and other financial documentation.
- Non-streamlined Installment Agreements:
If you do not meet the criteria for a streamlined, guaranteed or partial payment installment agreement, you may need to look into a non-streamlined installment agreement. These agreements fall outside of the scope for an automatic approval and need to be negotiated directly with the IRS. They most often involve a tax lien and you may be asked to sell property or take out a second mortgage to pay this debt back.
If you think that you may qualify for an installment agreement, you may want to consider partnering with an experienced tax firm to help negotiate the terms of the agreement. These negotiations are extremely important and can have a long term impact on your entire financial outlook.
Success Tax Relief has a proven track record of success negotiating installment agreements on behalf of our clients directly with the IRS. Contact us today and we can review your unique tax situation, determine what type of agreement is most appropriate for your situation and help you pull together all necessary documentation for the application.