Installment Agreements

If you can’t pay all of your tax debt at once, you may be able to qualify to make  monthly payments through an installment agreement. The IRS understands that not everyone can pay their full balance in a lump sum and has made it an easy process to set up a monthly payment plan.

If you owe a smaller amount of tax debt and meet certain requirements, you may be able to set up your tax payments online.

You can set up payments online as an individual if:

  • All your tax returns are filed
  • You owe $50,000 or less
  • You can finish paying your debt within 72 months.

You can set up payments online for your business if:

  • You owe $25,000 or less
  • You can finish paying your debt within 24 months
You can still pay in installments if you don’t qualify for online payments. Seeking assistance from a tax relief company can help you setup your payment plan and also get you the best possible deal with the IRS. The IRS sometimes recommends that your monthly payment be an amount that feels impossible. A tax relief company can help you negotiate this payment to a place that works for both you and the IRS. However, you will want to pay the highest amount you can monthly to avoid accruing more interest on your tax debt.

There are six different types of IRS installment agreements:

  • Guaranteed Installment Agreement: This agreement is for individual taxpayers only, not businesses. It is called a “guaranteed” agreement because it is guaranteed to be approved under the law, under certain circumstances. To qualify for this agreement you must owe $10,000 or less, prove that you cannot pay by lump sum, and be able to pay within 3 years. You also cannot be in Bankruptcy, cannot already have an Installment Agreement in place, and cannot have had an Offer In Compromise accepted.
  • Streamlined Installment Agreement: This agreement is best for individuals who owe $50,000 or less and businesses who owe $25,000 or less. It is called a “streamlined” agreement because usually doesn’t require verification of your finances. To qualify for this agreement, you must have filed all your tax returns, be able to finish your monthly payments within 6 years, and you must not have entered into any previous Installment agreements over the last five years. You also cannot be in Bankruptcy or have had an Offer In Compromise accepted.
  • Non-Streamlined Installment Agreement: This type of agreement is called “non-streamlined” because it is an option for those who do not qualify for the more typical guaranteed and streamlined agreements. This agreement is for those who owe more than 50,000, those who need to pay over more than five years, or those who don’t qualify for a guaranteed or streamlined agreement in some other way. This agreement must be negotiated with the IRS on a case-by-case basis.
  • Fresh Start Installment Agreement:  This is a new option from the IRS that has increased the threshold for streamlined installment agreements. This agreement helps those who owe up to 50,000 dollars get streamlined approval (including an immediate stop on collections) with limited financial documentation necessary. This agreement has also increased the maximum payment time for installment agreements to up to 6 years, as long as the taxpayer agrees to monthly direct deposit payments. Fresh start installment agreements are a great option for those who did not previously qualify for installment agreements.
  • Partial Payment Installment Agreement: This agreement is best for those who cannot pay their full tax debt. You will need to have no assets and will need to show your inability to pay in full, even over time. You will likely want to meet with a tax expert to see if you qualify to propose this more complicated agreement to the IRS.
  • Direct Debit Installment Agreement: Direct Debit Installment Agreements are simply agreements in which your monthly payment is directly taken from your bank account. You will need to provide the IRS with your checking account number, your bank routing number, and written authorization of payment. This agreement is a good option to help ensure you uphold the terms of your agreement by never missing a payment.

It’s Important to Know:

  • The minimum payment for an installment agreement is $25
  • Your installment agreement will default if you do not make your minimum monthly payment when it is due
  • Your installment agreement will default if you fail to provide the IRS with financial information they request
  • There is a $45 reinstatement fee to re-establish a defaulted installment agreement

The type of IRS installment agreement you qualify for depends on your unique financial factors, such as how much tax you owe, your income, your ability to pay monthly, and your assets. A tax relief expert can help you discover which agreement works for your unique situation. The experts at Vanguard Tax Relief can help you choose the correct installment agreement and terms for your unique financial situation.

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