When you owe a large sum of money in back taxes it can be overwhelming to pay it back all at once. The IRS has a payment plan called an “installment agreement” which allows you to pay off your tax debt in set monthly amounts over time.
There are four types of installment agreements that the IRS offers.
How to Qualify
In order for you to qualify for the program you need to meet following criteria:
- For the previous five years you haven’t filed late or paid late.
- All of your tax returns are filed.
- Your monthly installment payments will pay off your balance within set period of time.
- You’ve had no installment agreement in the previous five years.
- You agree to file on time and pay on time for future tax years.
The monthly payment is determined as a sum of all you taxes plus the penalties and interest divided by thirty.
By signing up for an installment agreement you are assuring that the IRS will not take any aggressive collection actions towards you such as a lean, levy or wage garnishment.
Types of Installment Agreements
- Streamline Installment Agreement: The IRS will approve this installment plan if your balance due is $25,000 or less, and you agree to pay off the balance within set period of time.
- Partial Payment Installment Agreement: If you cannot afford to pay as much as the streamlined installment agreement demands per month, you might be better off with this payment option. In this case the monthly payment is based on what you can actually afford after taking expenses into consideration.
- “Non-Streamlined” Installment Agreement: If your balance due is over $25,000, or you need a repayment term longer than five years, or if you don’t meet any of the criteria for the plans above you will need to negotiate with the IRS on your own terms. The IRS in this case will file a lien against you and might ask you to sell some of your assets in order to help pay off your debt. As in the other plans they will attempt to calculate how much you can afford to pay per month after all of the above procedures are in place.
Tax debt is a serious problem that will not go away on its own, and negotiating with the IRS can be difficult process.
To find out if you are likely to qualify for an Offer in Compromise or one of the other programs, talk to one of our tax professionals today. We are offering a free 15-miute consultation to taxpayers who call right now.