An IRS installment agreement offers taxpayers a structured payment plan to gradually pay off their tax obligation. Instead of facing the overwhelming burden of a large lump-sum payment, this agreement allows individuals to make smaller and more manageable payments. It provides financial relief while ensuring compliance with tax obligations.
Types Of Installment Agreements
The IRS provides a range of installment agreements, each designed to accommodate different financial circumstances. These options cater to diverse needs and ensure easier repayment for individuals
- Lump-Sum Installment Agreement is an extension allowed by the IRS which allows taxpayers up to 120 days to secure funds and make a lump-sum payment often known as full payment.
- Streamlined Installment Agreement: If the debt is between $50,000 to $100,000, you may enter into an 84 month payment plan or within collection statute whichever is longer. With the streamline payment plan, no financial disclosure is required and Statue of Collection Expiration Dates (CSED) is not a factor. If you have a federal tax lien, you may qualify to have your federal tax lien withdrawn by entering into direct debit installment agreement. You have not previously defaulted on a direct debit installment agreement.
- Non-streamlined Installment Agreement: Allows taxpayers with tax liability up to $250,000 to enter into payment with no financial disclosure as long as the balance is paid off before the CSED expires. If the taxpayer is unable to pay the monthly payments, a full disclosure of financials will be required.
- Partial Payment Installment Agreement: In cases where paying off the entire debt is not viable, a Partial Payment Installment Agreement (PPIA) becomes an ideal solution. This agreement allows taxpayers to be on a small monthly payment based on financial disclosure until the CSED expires.
Opting for an IRS installment agreement plan has several benefits. Firstly it allows you to pay off your debt in smaller regular amounts reducing the financial strain. Secondly, entering into an installment agreement can prevent the IRS from taking more serious enforcement action such as levies or garnishments as long as you comply with the agreed-upon payment plan. In some cases,it can even prevent a federal tax lien from being filed if one has not been filed. You must be current with filing of all your tax returns before an Installment Agreement can be approved and oftentimes, Form 9465 needs to be submitted to the IRS.
Navigating IRS installment agreements can be complicated but you don’t have to face it alone. Our experienced tax professionals at Lifeback Tax Relief understand the intricacies of these agreements and we are here to guide you through the process.
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The IRS charges an interest rate on payments for installment agreements. These change every quarter and are calculated by adding the short-term federal rate and compound interest of 3% charged daily.