One thing is certain about taxes owed to the Internal Revenue Service. Tax liabilities will be collected, one way or another. For those who are unable to pay at tax time, the IRS has provisions in place that allow taxpayers to spread the payments over time. Taxpayers can qualify for tax debt relief through installment agreements, depending on the amount of liability and how quickly one can commit to full payment of their tax arrears.
If the total tax debt does not exceed a certain threshold and the taxpayer can pay the full amount within 120 days, an installment agreement is not necessary. Taxpayers get a free pass on fees associated with setting up the installment agreement. Partial payment can be made at the time returns are filed. Regular payments should then be scheduled over the grace period.
The process of setting up an installment agreement is fairly straightforward. A request can be made online using Form 9465. If the tax liability is in a manageable range and five years of tax records show the taxpayer has judiciously filed and paid all obligations, the IRS will approve the request. This is called a guaranteed installment agreement. Under this plan, the balance should be paid off in 36 months or less.
On the other hand, a streamlined installment agreement may be more viable for higher tax liabilities, provided taxpayers can complete the payoff within 60 months or less. As with guaranteed installment agreements, the IRS requires that taxpayers must have filed all tax returns from the previous years. Taxpayers also agree to timely filing of all future tax returns.
In both cases, the IRS will not require a Form 433-F, a financial statement intended to scrutinize the applicant's income and expenses. In addition, the IRS will withhold filing of a federal tax lien, an action that can damage one's credit standing.
A partial payment installment agreement may be a better option for taxpayers who need a tax debt relief schedule that is in line with their current living expenses. Under this plan the IRS will require Form 433-F, pay stubs, bank statements and other proof of income and expenses. The IRS may file a tax lien and will re-evaluate the agreement every two years to determine if payments can be escalated.
Non-streamlined installment agreements are for taxpayers whose obligations exceed higher thresholds, are unable to commit to a five-year repayment plan or who do not qualify for other installment agreements. This plan will have to be negotiated directly with an IRS agent.Â
Tax issues are often complex but consulting a qualified tax professional will ease the process and resolve problems effectively.
If the total tax debt does not exceed a certain threshold and the taxpayer can pay the full amount within 120 days, an installment agreement is not necessary. Taxpayers get a free pass on fees associated with setting up the installment agreement. Partial payment can be made at the time returns are filed. Regular payments should then be scheduled over the grace period.
The process of setting up an installment agreement is fairly straightforward. A request can be made online using Form 9465. If the tax liability is in a manageable range and five years of tax records show the taxpayer has judiciously filed and paid all obligations, the IRS will approve the request. This is called a guaranteed installment agreement. Under this plan, the balance should be paid off in 36 months or less.
On the other hand, a streamlined installment agreement may be more viable for higher tax liabilities, provided taxpayers can complete the payoff within 60 months or less. As with guaranteed installment agreements, the IRS requires that taxpayers must have filed all tax returns from the previous years. Taxpayers also agree to timely filing of all future tax returns.
In both cases, the IRS will not require a Form 433-F, a financial statement intended to scrutinize the applicant's income and expenses. In addition, the IRS will withhold filing of a federal tax lien, an action that can damage one's credit standing.
A partial payment installment agreement may be a better option for taxpayers who need a tax debt relief schedule that is in line with their current living expenses. Under this plan the IRS will require Form 433-F, pay stubs, bank statements and other proof of income and expenses. The IRS may file a tax lien and will re-evaluate the agreement every two years to determine if payments can be escalated.
Non-streamlined installment agreements are for taxpayers whose obligations exceed higher thresholds, are unable to commit to a five-year repayment plan or who do not qualify for other installment agreements. This plan will have to be negotiated directly with an IRS agent.Â
Tax issues are often complex but consulting a qualified tax professional will ease the process and resolve problems effectively.