5 Types of IRS Installment Agreement to Pay Your Tax Debt

About Self-Employment Tax

The IRS offers installment payment plans to taxpayers whose tax bill is too hefty for a single payment. Under this plan, taxpayers can spread their payments over several months to make the bill more manageable. If individuals don’t pay such installments on time, the IRS may seize their property, place liens against their assets, and even garnish their wages. After approving a payment plan, the IRS will charge the taxpayer some extra fees. Taxpayers who qualify for a short-term payment plan are not required to pay such a fee. Continuing on the subject, let’s look at five types of IRS installment agreements that are available to taxpayers with outstanding IRS debt. Read on!

1. Guaranteed Installment Agreement

A guaranteed installment plan is designed for taxpayers who owe the IRS up to $10,000 in taxes. To qualify for this plan, taxpayers should meet the following criteria:

  • Filed all tax returns the past
  • Must have paid all the previous returns up to five years on time.
  • Must not have used any other installment agreement within the last five years.
  • Must be able to pay the total debt within three years.

Taxpayers who meet all these criteria can apply for this IRS installment agreement online. They are not required to provide a full financial statement to the government.

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2. Streamlined Installment Agreement

A streamlined installment agreement is designed for taxpayers with debts of up to $50,000. Taxpayers can easily qualify for the IRS payment agreement and extend their payments for up to 72 months or six years. Like the Guaranteed Installment Agreement, taxpayers are not expected to provide a full financial statement to the IRS.

3. Payment Agreement for Debts Over $50,000

This settlement plan is for taxpayers who owe more than $50,000 to the IRS and do not easily qualify for the streamlined and guaranteed IRS payment agreements. The IRS thoroughly reviews the financial situation of such taxpayers to make sure they pay the debt off as early as possible. It will also demand that taxpayers furnish it with a financial statement. To avail this plan, it is recommended to get help from a tax professional as they can make sure that the IRS gets all the required financial information and also fill out a Collection Information Statement (Form 433-F or Form 433-A).

4. Partial Payment Installment Agreement

In situations when the outstanding tax amount is hefty and is not affordable, taxpayers may qualify for a partial payment installment agreement. The agreement allows taxpayers to take more time to repay the debt. The IRS will evaluate the financial position of the taxpayer including their equity in assets every two years to check if they are better off. In some cases, taxpayers may even have to sell their property to pay off their tax debt.

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5. Offer in Compromise

The IRS may allow taxpayers who can’t afford their tax installments, even in partial payment installment agreement, to pay less than what they owe under an offer in compromise. To qualify for an OIC, taxpayers must have filed all their past tax returns, made all the necessary tax payments for the current year, and made all federal tax deposits for the current quarter.

Wrap Up

It is important to know that the IRS can revoke any installment arrangement if a taxpayer misses a payment, does not file a tax return, or provides inaccurate information on Form 433-F. While it is easy to qualify for an IRS installment agreement if you owe less than $50,000 to the government. To apply for agreements for debts over $50,000, it is recommended to seek assistance from a tax professional who can help you to successfully apply for the settlement plan. To discuss the best IRS installment agreement for you in Dallas, Texas, simply call the Law Offices of Nick Nemeth at (972) 484-0829 or fill out the form fill on our website to schedule a free, no obligation, and confidential consultation with Nick.