Requesting an Installment Agreement: When & What Type
Should you request an IRS installment agreement? When requesting an installment agreement, which one is best? If you have questions like that, here’s what you need to know.
When to Consider an Installment Agreement
There are three common situations where an installment agreement can be appropriate:
- You can’t pay your taxes all at once. You can afford to make monthly payments
- Your Offer in Compromise was rejected.
- You can’t get a lower interest loan to cover your tax debt.
If you request an installment agreement, you need to propose a monthly payment. However, your payment also has to cover your interest and penalties as well as part of the principal balance. If it doesn’t, the debt will just get larger.
Generally, if you are on an installment agreement, the IRS will not seize your assets. However, there are a few rare exceptions. For example, if you sell your home, the IRS may require you to use the proceeds to cover your tax debt.
Requesting an Installment Agreement (IA):
Depending on your financial situation, and your total debt balance, there are four ways to request an installment agreement from the IRS.
- You can use the online IRS payment agreement application if you are an individual who owes $50,000 or less. If you are a business that owes $25,000 or less, you can use it as well.
- Call the IRS at 1-800-829-1040
- Mail form 9465, Installment Agreement Request to the IRS
- Have a licensed tax professional (EA, Tax Attorney, CPA) negotiate with the IRS on your behalf
Types of Installment Agreements
- Guaranteed Installment Agreements are the easiest plans to obtain. If you meet the criteria, you are accepted. You must owe $10,000 or less. You must be able to pay the balance plus interest and penalties within three years or by the CSED. Only individuals qualify.
- Streamlined Installment Agreements (SIA) are for individuals who owe $100,000 or less or for active businesses that owe $25,000 or less. Additionally, out of business sole-proprietors with more than $25k in debt can use this option. Sole proprietors and individuals can take up to 84 months to pay, where most businesses are granted 36 months for income tax debts. Businesses get 24 months repayment terms for trust fund taxes. SIAs require no financial disclosure.
- Financially Verified Installment Agreements are for individuals who do not qualify for an SIA. To qualify, you must submit a financial disclosure showing your income, assets, debts, and expenses. Furthermore, this is a paperwork heavy plan that usually requires the help of a licensed professional.
- Partial Payment Installment Agreements (PPIA) are when the IRS agrees to smaller monthly payments than with a normal agreement. Furthermore, this settlement technique is easier to obtain than an Offer in Compromise (OIC). As a result, a PPIA is a feasible alternative to an OIC rejection letter. However, the IRS reviews your financial situation every 2 years.
- Direct Debit IRS Installment Agreements (DDIA) are agreements where monthly payments are taken out of your bank account. These agreements are if you owe less than $50,000 in tax and are seeking the withdrawal of a tax lien. For tax debts above $50,000, an SIA requires a direct debit or a payroll deduction.