Streamlined IRS Installment Agreement

streamlined installment agreementA Streamlined Installment Agreement is best again if you owe the IRS $50k or less including penalties and interest. The same is true for businesses, except that the limit is $25,000. The reason they are coined “streamlined” is because it generally does not require verification of financial assets, expenses, and income (Form 433 or a Collection Information Statement). This payment plan repayment period is usually over 6 years or generally at the latest by the CSED. Again, as a general rule of thumb, to calculate your minimum payment plan, take the total taxes you owe plus penalties and interest, and divide that by 72 months.  Interest is the reason why you want to pay off your balance in the shortest amount of months because you end of paying less interest the faster you pay it off. If you cannot make the minimum monthly payment, consider an Offer In Compromise, a Partial Payment Installment Agreement, or try to prove Financial Hardship to the IRS.

IRS Streamlined Installment Agreement Tax Update

In 2011, the IRS Launched its Fresh Start program which made it possible for businesses to obtain a Streamlined Installment agreement with tax liabilities totaling $25k or less (previously 10k). Moreover, the IRS stated that individuals who converted to a direct debit installment agreement can avoid or have their tax liens negated.

In February 2012, the IRS stated that now that individual taxpayers with up to $50k in tax liabilities can qualify for a Streamlined Installment Agreement as long as they agree to a direct debit payment method.  Businesses now qualify for trust-fund repayment plans up to $25,000 but must pay the balance off within 24 months or by the CSED (whichever comes first). See IRS.gov for more information.

Requirements for a Streamlined Installment Agreement

Some requirements for a Streamline Agreement are as follows:

  1. $52 user fee if you setup the payment as a monthly direct debit from your bank account. This is fee is normally taken from your first monthly payment so you need to make sure your first payment covers the application fee. If you pay by check or money then the application fee is $120. It costs $50 to reinstate or modify an existing installment agreement.
  2. Must have filed tax returns and if you didn’t you will first need to file all delinquent tax returns for previous years and this year to be considered for any type of IA.
  3. Owe less than $25k including assessed penalties and interest (not accrued). Update: Now it is up to $50k.
  4. Willing to make monthly payments over a period of no more than 6 years or generally within the CSED.
  5. If your tax debt is from more than 5 years ago, try to obtain from the IRS the Collection Statute Expiration Date (CSED). This is the date that your tax debt starts to become uncollectible. Therefore, if your Streamlined IA is impacted within 6 years by your CSED the IRS may require the pay back period to end by the CSED (at the latest) or ask that you extend your CSED with a waiver.
  6. You have not entered into any previous Installment Agreements over the last 5 years (including your wife/husband if filing jointly). There are exceptions where sometimes new problematic tax liabilities can be rolled into an existing Installment Agreement you may have.
  7. You cannot be in or seeking bankruptcy or had an Offer In Compromise accepted.

How to File or Request a Streamlined IRS Installment Agreement

  1. Contact the IRS to make sure you don’t have any tax returns missing or unfiled. If you do, make sure to file them first and get into compliance. See our File back taxes page to get started.
  2. Print, fill out, and read the directions of Form 9465 Installment Agreement Request or use the Online Payment Agreement (OPA) or call 1-800-829-1040 to have the forms mailed to you. It is best to do the OPA because you will know in a short period of time if your agreement has been accepted. Figure out your monthly payment again which we discussed above by dividing the sum total of current tax penalties and interest by 50 months. The IRS also states that you will also “need to specify the amount you can pay and the day (1st-28th) you wish to make your payment each month.”
  3. Make sure to select your payment method when filling out the form. Direct Debit (user fee $52), Payroll Deduction (application fee $120), or by sending a check or money order (application fee $120). The IRS prefers Direct Debit. If you decide a payroll deduction is better for you then you need to fill out form Form 2159, the Payroll Deduction Agreement, if the 52 dollars is tough for you.
  4. Optional: Contact a Tax Professional such as a Tax Attorney or Certified Public Accountant (CPA) to help you with the forms and the process. This is usually recommended as any mistakes will only lead to interest and penalties accruing.
  5. Make sure to file and attach Form 9465 to the front of your return which can be Form 1040, or 1040EZ or 1040A. You can send your first payment 30-45 day later if you want but is not recommended. You will receive a written notification of the Installment Agreement in the mail and the IRS will let you know within 30 days typically of requesting it (if not done after March 31st) whether it has been accepted or not.
  6. If you don’t use the Online Payment Agreement link with the IRS and are going to mail in Form 9465, be sure to send to the right address on the form as the address you send to is determined by what State you live in.

*Contact the IRS if at any point you cannot make monthly payments anymore. The reason is that missed payments could lead to a termination in the Agreement. If your agreement is rejected the IRS cannot levy (seize assets or property) you for 30 days, or during the period it is being evaluated whether new or an appeal.