3 Types of IRS Installment Agreements

When you did your federal income taxes for 2019, did the outcome make you wince because you owed more than you could afford to pay? It’s a stressful situation, but it’s not unusual. Each year, so many taxpayers are left in similar circumstances that the IRS routinely offers installment agreements with those who qualify for relief.

There are three types of installment agreements available, each one with its own terms and eligibility criteria. Interest and penalties will apply, but the right agreement for your circumstances can protect you from wage garnishments, bank levies, and other collection methods that the IRS has at its disposal.


Guaranteed Installment Agreements

If you owe $10,000 or less as an individual taxpayer, you may apply for a guaranteed installment agreement if you meet the following conditions:

  • Your tax debt is no more than $10,000 (not including interest and penalties).
  • You have filed all of your tax returns in the previous five years, paid all taxes owed, and never entered into an installment agreement.
  • You cannot pay your tax debt when due or within 120 days.
  • You appear to be able to pay the tax debt within three years.

When entering into a guaranteed installment agreement, you must remit a minimum monthly payment until the debt is paid. As long as you remain current on your payments, the IRS will not file a tax lien against you.


Streamlined Installment Agreements

You may propose a streamlined installment agreement if you owe $50,000 or less in personal income taxes. Businesses that have since shut down may also be eligible. The criteria for proposing for a streamlined installment agreement are as follows:

  • Your tax liability does not exceed $50,000 (including interest and penalties).
  • You can pay it off within 72 months.
  • The amount you propose to pay per month is equal to or greater than the minimum acceptable payment, which is the greater of $25 or the amount reached by dividing your total tax liability by 50.

There is a fee to set up a streamlined installment agreement, although it is reduced if you opt to make payments via direct debit. Low-income taxpayers can apply to have the fee lowered or waived. If you owe more than $50,000 and can afford the monthly payments, a non-streamlined agreement may be an option, although approval is not automatic. You will have to negotiate the terms with the IRS, ideally with the assistance of an attorney, and submit a completed Form 433-F, which includes information about your income, living expenses, debts, bank accounts, and assets. If the IRS rejects your proposed agreement, you may want to consider filing an Offer in Compromise.


Express Installment Agreements 

If you operate a business and owe less than $25,000 in employment taxes, an express installment agreement can help you repay the debt on affordable terms. Also known as an In-Business Trust Fund Express Installment Agreement, the qualification criteria are:

  • You must be compliant with all requirements for filing and paying the business taxes.
  • You owe no more than $25,000 when the agreement is created. If you owe more, you are allowed to pay it down to the allowed amount before entering into the agreement.
  • You must pay the balance in full within 24 months or before the collection statute expires, whichever is sooner.
  • If the amount you owe is between $10,000 and $25,000, you must enter into a Direct Debit installment agreement.

If you are concerned that you won’t be able to pay your tax liability in full by the deadline, requesting an installment agreement can help you avoid distressing consequences such as garnishments and levies. An experienced tax attorney will help you navigate the process by explaining how these agreements work and what you must do to comply.


Contact an Attorney

Negotiating a workable installment agreement requires in-depth knowledge of IRS guidelines. At Maxwell Dunn, PLC we know how to approach these negotiations and present payment plans that the IRS will find acceptable. Contact us to learn more!