An Installment Agreement is an agreement between the IRS and the taxpayer that enables the taxpayer to pay their debt over time (generally 60-72 months) when he or she can’t pay the full amount owed in a lump sum.
4 Types of Installment Agreements Under the IRS Fresh Start Program
- If the taxpayer owes $10,000 or less, has all tax returns filed, has no enforced collection, and can pay the balance back in 36 equal monthly installments, the IRS will automatically approve the taxpayers acceptance into its installment payment plan program.
- If the taxpayer owes up to $25,000, has all returns filed, is not under a wage garnishment or bank levy, and can pay the full amount in 72 months or less (or until the Collection Statute Expiration Date, whichever is shorter), the IRS will grant a monthly installment payment plan under its Fresh Start initiative. Limited financial disclosure is required.
- If the taxpayer owes between $25,000 and $49,999, has all returns filed, is not under a wage garnishment or bank levy, and can pay the full amount in 72 months (or until the Collection Statute Expiration Date, whichever is shorter) through a Direct Debit Installment Agreement (DDIA), the IRS will grant a monthly installment payment plan under its Fresh Start initiative. The taxpayer must have a bank account he or she can designate for the IRS to automatically debit on a monthly basis. Limited financial disclosure is required.
- If the taxpayer owes between $50,000 and $249,999, has all returns filed, is not under a wage garnishment, and can full pay the liability in 84 months (or until the Collection Statute Expiration Date, whichever is shorter), the IRS will grant an Installment Agreement.
Note: If the taxpayer owes over $250,000, the case will be referred to a revenue officer, and full financial disclosure is required. A federal tax lien will most likely be filed as well.
In summary, you never want the IRS to give you financial advice. Their goal is to get as much money from you as possible.
The above list of the 4 types of installment agreements indicates what the IRS will typically accept and approve. But what if you can’t meet those requirements? Or wouldn’t you want to pay less? That’s where we step in and negotiate directly with the IRS on your behalf. In most circumstances, we can negotiate a better installment agreement – in your favor. Let us do that for you.
We speak their language and we know how they think. We’re crafty tax negotiators working on your behalf.
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