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Key Takeaway

If you enter into an installment agreement, with the IRS, you are bound to pay according to terms – or the agreement can be revoked and IRS penalties and interest can mushroom out of control. So, if your tax debt is substantial, consider getting a free evaluation from a BBB accredited tax relief organization who can determine if an installment agreement is truly your best course of action – or if currently not collectible or offer in compromise might be a better course of action considering your current income and circumstances.

Fact Sheet: IRS Installment Agreement

When paying an entire tax debt all at once is not possible, the IRS allows taxpayers to pay off the tax debt through an installment agreement. Penalties and interest on an installment agreement can equal 8 percent to 10 percent each year. The IRS offers four different types of installment agreements: guaranteed, streamlined, partial payment and non-streamlined.

Overview of the IRS Installment Agreement

There are differences in the criteria for eligibility for each type of installment agreement. For example, to qualify for the guaranteed installment, taxpayers must owe less than $10,000, and in September of 2016 the IRS began testing expanded criteria for streamlined processing of taxpayer requests. During this test, taxpayers with an assessed balance of tax, penalty and interest between $50,000 and $100,000 may experience accelerated processing of their installment agreement request. Based on test results, the expanded criteria for streamlined processing of installment agreement requests may be made permanent. Under both of these installment agreements, the IRS does not file a tax lien against the taxpayer. Taxpayers are required participate in a financial review every two years in a partial payment installment agreement, which may result in termination of the agreement or an increase in monthly payments. The non-streamlined installment agreement is an option for those with tax debt over $25,000. If you do owe more than $25,000, you may first want to consult a tax professional to see if you can be considered "currently not collectible" or possibly eligible for an offer in compromise.

Three Important Points Related to IRS Installment Agreements

The IRS can revoke an installment agreement when:

  1. The taxpayer misses a monthly payment
  2. The taxpayer provided inaccurate information on Form 433-F
  3. The taxpayer fails to pay taxes after entering into the agreement, or the taxpayer does not file a tax return

A Closer Look at the IRS Installment Agreements

The IRS will be requesting information from a taxpayer about their income, assets, debts, bank accounts and living expenses when applying for an installment agreement. If some of provided information is untruthful or inaccurate, the application may be denied. Accuracy and honestly are key here. It takes approximately 30 days or more for the IRS to process a request for an installment agreement. In the interim, the IRS is not permitted to take any collection actions against you.

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