The 4 Installment Agreement Types (And Other Things You Must Know)
Though the installment agreement is a popular option the Fresh Start program offers, there are several types. To ensure you get the optimal tax resolution, it’s important to read through each type and pick the one that suits your needs best.
What Is An Installment Agreement (IA)?
An installment agreement is one of the tax relief options offered by the IRS Fresh Start Program. It’s very similar to a payment plan whose end goal is to reduce tax debt.
When someone accumulates tax debt, sometimes the full amount is more than the taxpayer can pay all at once. So, this is why the IRS put together this program.
How To Get Approved For An Installment Agreement?
The main requirement to get approved for an installment agreement (and any other Fresh Start Program) is to file all missing/uncompleted tax returns.
Based on this information, your back tax balance will be up to date. Similarly to completing your own tax return or representing yourself in court, the IRS has an option to apply for an IA by yourself. However, in most cases it is beneficial to have a professional by your side.
If you’re struggling with this process, you don’t have to get your taxes in order alone. As a professional tax relief company, TaxRise can ensure all of your tax returns are correctly filed. Additionally, we offer a
free tax consultation that will help determine if you qualify for our services and which tax relief program will work best for your unique situation.
We help advocate on your behalf to the IRS for the best tax relief outcome possible.
Will The IRS Be Able To Garnish Wages Or Seize My Assets?
Once you’re in an installment agreement with the IRS, then no, the IRS can’t typically seize your assets in order to pay off your tax debt.
Viewed a formal resolution, installment agreements show that you’re making the effort to reduce your tax debt.
Installment Agreement: The 4 Different Types And Which Is The Best For You
As you can see, the IRS offers several options when it comes to installment agreements. Though there are different installment agreement types, they have more in common than they have differences.
The thing each installment plan has in common is that interest still accumulates. So, we advise you to pay off the debt as fast as you can.
1. Guaranteed Installment Agreement
If you meet the following criteria, then you’re eligible for the guaranteed installment plan:
- Owe under $10,000 in back taxes
- Filed all previous tax returns
- You’ve filed your past 5 years’ worth of returns have been filed and paid on time
- Haven’t used an Installment Agreement in the past 5 years
- Will pay off entire amount within 3 years
The reason why this type of installment agreement is called guaranteed is because if you meet the requirements, then you’re guaranteed by law to be accepted by the IRS.
This is the most popular installment agreement type since many Americans who owe back taxes meet the requirements.
2. Streamlined Installment Agreement
A streamlined installment plan is similar to the general installment agreement but can be used for tax debt between $25,000 and $50,000 (including penalties and interest).
Additionally, your time to pay off your tax debt is extended from 3 years to 6 years (72 months).
The reason why these installment plans are called streamlined is that you don’t need to verify your income, expenses, assets, or liabilities. You just need to be able to pay off your balance in under 6 years.
Once 6 years pass, the balanced and any additional accrued interest will be forgiven. Please note that the interest that accumulated before the IA was started won’t be forgiven.
3. Partial Payment Installment Agreement
If your tax debt is deemed unaffordable, then you may qualify for the partial payment installment agreement.
This type of installment agreement is a bit hard to quantify, as the IRS hasn’t set any specific debt limit on this. This plan depends on your income and debt ratio.
In this plan, you make monthly payments to the IRS and after a set duration, your tax debt is deemed paid off despite you not paying it all completely.
In this type of installment agreement, the IRS will take a look at your income, expenses, assets, and liabilities.
This is a good option for those who were rejected from the offer in compromise (OIC) program.
4. Non-Streamlined Installment Agreement
The non-streamlined installment plan is for those who owe tax debt between $50,000 and $250,000.
The IRS will not look at your income or assets.
If you don’t know which Fresh Start Program or installment plan best suits your needs, check out TaxRise’s
free tax consultation. From this quick call, you’ll be able to determine if you qualify for our services and which tax relief program will work best for your unique situation.
We help advocate on your behalf for the best tax relief outcome possible.
TaxRise has helped thousands of taxpayers just like you resolve their tax issues and erase their tax liability.