Installment Agreement - Pay Your IRS Debt Over Time.
For those struggling underneath the weight of tax debt, it can seem like there are no options available for you but to try to come up with a huge sum of money somehow.
But there are actually many different options out there for those who owe back taxes and other forms of tax debt, and often finding relief is as simple as determining which method of tax relief is right for you and then making sure that you qualify for it.
One option is to use an installment agreement to pay off your debt gradually.
Installment agreements are just what they sound like – an agreement between you and the IRS that allows you to pay the amount of tax debt you owe through a monthly payment process, much like a credit card payment.
This is usually utilized in cases where the amount of back taxes owed is so large that paying back the full amount in one lump sum isn't possible in the least. In these cases, you can repay your debt gradually. It's a good option for many, especially those who aren't able to qualify for other options like an offer in compromise.
One important thing to remember is that there are only certain instances when the IRS is required by law to agree to an installment plan.
You must meet the following requirements in order to gain approval:
• Owe $10,000 or less
• Have no instances of filing or paying late during the previous 5 years
• All tax returns must be filed
• You cannot have had an installment agreement during the previous 5 years
• You must agree to file all taxes and pay all taxes on time in the future
• You must set up monthly payments that will allow you to pay off the full tax balance within 36 months or less
If you meet these requirements, the IRS will be required to accept an installment agreement from you.
Your monthly payment amount will be determined by dividing your total balance due by thirty. This will include interest and penalties that you have accrued. However, by agreeing to an installment agreement you won't face issues like a tax lien or wage garnishment, and it will be easier to keep the rest of your personal finances adjusted properly.
To file for an installment agreement, you'll need to fill out Form 9465 and submit it to the IRS. You won't be required to fill out the usual Form 433-F, which contains details of your overall financial situation. Only the request form will be required.
For those who owe more than $10,000 to the IRS, other options exist.
One is a streamlined installment agreement.
There are two types of Streamlined Installment Agreements:
• Those who owe $25,000 or less can agree to pay off their total balance within 60 months or less. However, if the statute of limitations will fall during that 60 month window, the full payment will be required to occur within the confines of the statute of limitations.
• As part of the 'Fresh Start Initiative' from the IRS, a new law went into effect in 2012 allowing those who owe $50,000 or less to enter into a streamlined installment agreement as long as they agree to pay off the total balance within 72 months or less.
A similar process for qualifying for the streamlined installment agreement exists, including the filing of Form 9465. You'll also have to agree to file and pay all future tax returns on time in order for the agreement to be approved.
Partial payment installment agreements may be another valid option, particularly for those who find that the minimum payments for the standard or streamlined agreements are difficult to meet.
In these cases, the monthly payment you must make will be based on your current financial situation, not simply on the amount you owe.
These plans can be designed to take much longer to repay the full amount, but are more complicated to apply for. In addition to the installment agreement request form you will be required to fill out and submit Form 433-F.
This form is a financial statement that allows the IRS to see your average income and look at living expenses and other information. The form must be sent in with documents proving the information in the form is valid. Documents you'll have to submit include paystubs, bank statements, and more. It's important to note that, with partial payment agreements, your finances will be reviewed every two years by the IRS to determine if circumstances have changed enough to warrant you paying more.
One more option that is available to debtors is a non-streamlined installment agreement.
It's a valid option for those who owe more than $25,000 to the IRS, need to repay over a period of time longer than 5 years, or who don't meet other basic requirements for qualifying for the standard or streamlined agreements.
In these cases you'll have to negotiate an installment agreement between yourself and the IRS. This process involves negotiations with an IRS agent, who will then send your information to a manager for review and – hopefully – approval.
You'll need to submit a Form 433-F in order to gain approval or begin the negotiation process. The form will provide the IRS agent the information they need in order to determine what your monthly payments should be and determine what types of terms should be put in place.
In most cases you'll have a lien filed against you and will request that you sell off your assets or attempt to secure loans prior to the agreement. The goal in this situation will be to avoid the installment agreement entirely, with it being used as a last resort.
It is also worth noting that not everything is cut and dry in an installment agreement.
For instance, while you can't have property or wages garnished for the first 30 days after an agreement, there is a chance that through certain circumstances the IRS can file a tax lien against you. It's rare, but it is possible. And no two circumstances are identical, which means that in many cases the specifics of an agreement will vary on a case-by-case basis.
Those owing less than $10,000 have much less stress and fewer hoops to jump through, and their agreements are generally more secure.
Those owing more than $10,000 may find that the process of securing an installment agreement is much more complicated than they suspected.
In order to secure the best installment agreement for your situation, it's a good idea to spend some time finding a competent tax expert. Tax attorneys can help you get the best possible installment agreement, negotiate terms that are more beneficial to you, and do so while keeping much of the stress off your shoulders.
Attorney Jim Gilland has been practicing tax law since 1996 and has a history of helping clients stand up to the IRS and get the kind of results they need. Instead of handing all of the work off to paralegals, actual attorneys handle your request for an installment agreement and make sure you get the kind of agreement that works for you.
To get started on escaping from tax relief, contact Gilland law to set up a consultation soon.