Taxpayers can resolve their tax debt by paying the amount in installments. There are various types of Installment Agreements depending on the amount of tax debt owed and other specifications.
Guaranteed Installment Agreement
If a taxpayer owes $10,000 or less in tax debt, and meets the following criteria, the IRS will qualify them for paying their tax debt in fixed monthly installments.
- Past tax returns have been filed
- Previous five years’ returns have not been filed late or paid late
- An Installment Agreement plan was not used in the previous five years
- The entire tax debt amount will be paid in 3 years or less
Streamlined Installment Agreement
The IRS has introduced Fresh Start initiative for tax debt payment under which the IRS has relaxed many qualifying restrictions. Under the Fresh Start initiative, the maximum dollar criteria for streamlined installment agreements has been raised from $25,000 to $50,000 and the maximum term has been raised from 60 months to 72 months.
Taxpayers are generally not required to provide a financial statement, but certain financial information may be required to be shared with the IRS in the application process.
The Streamlined Installment Agreement is divided into two categories:
- Tax debt to the amount of $25,000 or less
- Tax debt to the amount of $25,001 to $50,000
Installment Agreement for Tax Debt of Over $50,000
Taxpayers with a tax debt of over $50,000 will need to furnish details of their finances. The IRS conducts a more thorough review of the financial situation of a taxpayer to ensure earliest payment of tax debt. Taxpayers may use Form 433-A or Form 433-F, Collection Information Statement, for providing the IRS financial information. They may also explore online payment agreement application.
Partial Payment Installment Agreement
Taxpayers that do not have the financial strength to pay the entire amount of tax debt may use Partial Payment Installment Agreement to get a reduction in tax debt so that they may comfortably pay the remaining amount in installments.
Installment Agreements have lower qualifying restrictions as compared to other payment plans, and allow taxpayers to comfortably pay their tax debt over a period of time. Taxpayers may choose an appropriate Installment Agreement to resolve their back taxes successfully.