IRS Installment Agreements
An IRS Installment Agreement, or IA, as defined by the IRS, will "allow for the full payment of the tax debt in smaller, more manageable amounts." In other words, you repay your tax debt over a period of time which is commonly no longer than 60 months (5 years) depending on the type of installment agreement you go with. In most Installment Agreements, it carriers and interest rate which means the longer you take to pay off your tax debt, the more you end up paying in the end (more than original balance). There are other types of Installment Agreements above 25k, they are just harder to obtain. Knowing which IA to use and the requirements that need to be met is important before going through the steps of how to file an IA. If you are considering bankruptcy as option, realize that only a Chapter 7 bankruptcy can release you from tax liabilities and is difficult ot quality for.
IRS Installment Agreement Request: When & What Type
If you realize for the current year year that you cannot pay your taxes, you need to make sure you first file anyway for this year or any previous year for taxes owed. An IRS Installment Agreement should be used when you feel you cannot pay your taxes in full nor can you receive a loan from the bank or financial institution at a lower interest then the IRS will give you. Interest rates with the IRS fluctuate but currently the IRS installment agreement rate is 4% (compounded daily) coupled with .25% failure to penalty (compounded monthly). Typically, you should look to pay 6-12% in interest on the balance owed per year. Get a better understanding of what are different typical installment agreements and which one is right for you.
How to Request a Guaranteed Installment Agreement
This is the easiest of the installment agreements to obtain. This installment agreement is "guaranteed" as long as you meet the requirements set forth by the IRS. This is only offered to those taxpayers that owe $10K or less in taxes and the total amount can be paid off in a period of 3 years or less.
Requirements & How to Request a Streamlined IRS Installment Agreement
If you owe $25K or less a streamlined installment agreement may be the best choice for you since it does not require verification of financial assets, exenses, and income. The IRS has specific requirements a taxpayer must meet in order to qualify for this type of payment plan and requires specific documents to be completed and submitted to the IRS before reviewing your case.
Requirements & How to Obtain a Verified Financial Statement Installment Agreement
This type of installment agreement is more difficult to obtain because of the additional paper work needed. This type of installment agreement is available to those taxpayers that owe over $25K in taxes or for those you cannot make the minimum monthly payment on a Streamlined Installment Agreement. The IRS will need to get a better understanding of your financial situation to determine if they will allow you to pay taxes owed over a period of time.
Requirements & How to Request a Partial Payment Installment Agreement
This form of installment agreement allows you to pay less than the total amount owed over a period of time. Since you end up paying less, this is a difficult installment agreement to obtain. You will have to fully disclose your financial information to the IRS in order for them to consider your case.
Appealing an IRS Installment Agreement
Get answers to how you can appeal an IRS Installment agreement that was rejected, terminated or is proposed to be terminated. Understand the process, procedure, and your rights as a taxpayer.
Frequently Asked Questions About Installment Agreements
Common questions taxpayers want to know about installment agreements.