Tax Blog

Tax Debt? Installment Plans are Here to Help

You’ve fallen on some hard times and you’ve got a bit of tax debt. Fortunately, you’ve got some options before you lose everything to asset seizures. The IRS offers a variety of installment plans to help those encumbered with debt, escape it. Here is an overview of those options in case you ever find yourself in the position where you need to choose which is right for you:

1. Guaranteed Installment Agreement

Ideally, you’ll be able to obtain this type of agreement. A Guaranteed Installment Agreement is available if you owe $10,000 or less to the IRS and it’s easy to qualify for the plan. You just need to be sure to meet a few criteria.

  • File all past tax returns.

  • Your previous five years’ returns may not have been filed or paid late.

  • You can’t have used an installment agreement plan within the previous five years.

  • You can pay the entire amount within three years or less.

If you meet these stipulations, all you need to do is apply online and you’ll get your installment plan and the time to pay whatever you owe in up to 3 years, hence the “guaranteed.”

2. Streamlined Installment Agreement

A streamlined installment agreement can be used for tax debts up to $50,000. Also easy to qualify for, it is similar to the guaranteed installment agreement (at least for now). You can make payments for as long as 72 months (that’s six years), and no financial statement is needed. The IRS Fresh Start Program made this possible.

So maybe you can’t fulfill the criteria for a guaranteed installment plan. If you are under $50,000, then you can apply for the similar Streamlined Installment Plan. The application process is a little more involved, but if your application is accepted (and it usually is), than you can have up to six years to pay back your full debt.

3. Installment Agreement for Tax Debt over $50,000

Pretty self-explanatory, but this is a situation that nobody wants to find themselves in. The IRS will review your financial situation and if they conclude that you are able to pay back this debt in a certain amount of time that they specify, they will allow you to pay back the debt on their terms. Be aware that the IRS will look for alternative methods of payment through liens or seizures if they determine that you are unable to pay a substantial debt.

4. Partial Payment Installment Agreement

If for some reason, your tax debt is just not affordable for you, you may, possibly, potentially qualify for a partial payment installment agreement. By that we mean it’s hard to qualify for this one, but it can allow some amount of a tax burden to be lifted for a longer period of time.

Basically, the partial payment agreement is granted when you are able to effectively argue that you cannot pay your tax debt in the guaranteed or streamlined options. You still agree to pay the full amount, but the IRS reassess your position every two years to determine what you can pay.

5. Offer in Compromise

Only granted to those who are really in a rough spot, the Offer in Compromise allows a portion of your tax debt to be forgiven, full stop. If you have significant external circumstances preventing you from paying in the foreseeable future, or have found yourself completely destitute, you might have a shot at this one. But this is more of a last resort and the IRS treats it as one. Never expect to get an OIC, but if you really need one, then the option is there.

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