| An Installment Agreement establishes a payment plan | | | | balance due is more than $25,000, you have to |
| for paying federal income taxes, much like setting up | | | | negotiate your installment agreement with the IRS. You |
| payment agreements when purchasing a car, house or | | | | also opt for a non-streamlined installment agreement if |
| any other commodity. An installment agreement, or IA, | | | | your repayment term is longer than 60 months, or you |
| is the most widely used method for paying off debts | | | | fail to meet the criteria associated with other |
| to the Internal Revenue Service (IRS). If you owe | | | | installment agreement plans. In this case you are |
| $25,000 or less, you qualify for an IA plan of 60 | | | | required to provide Form 433-F or Form 433-A along |
| months. If you owe more than $25,000, you will have | | | | with documentation and there is a high likelihood the |
| to negotiate with the IRS to formulate an appropriate | | | | IRS will file a federal tax lien. |
| installment plan. | | | | How to Set up an Installment Agreement with the IRS |
| If you owe more than $10,000 in tax liability to the IRS | | | | The IRS encourages taxpayers to pay what they |
| you may wish to seek representation from an Enrolled | | | | owe as early as possible. For individuals or businesses |
| Agent to increase the certainty you get a reasonable | | | | that cannot resolve their tax burden within the desired |
| IA payment that you can afford. Enrolled Agents are | | | | period, setting up an installment agreement with the IRS |
| licensed directly by the IRS to represent taxpayers. | | | | is the best option. Setting up an installment agreement |
| Enrolled Agents become licensed by passing the | | | | requires you to: |
| Special Enrollment Examination, also known as the EA | | | | * Have previously filed all your tax returns. * Disclose all |
| Exam and can practice throughout the United States. | | | | assets including cash and bank accounts. * Not be able |
| Types of Installment Agreements | | | | to borrow the amount due to the IRS from other |
| The main types of installment agreements are: | | | | sources, like a second home mortgage. * Not have |
| Guaranteed Installment Agreements: If you owe | | | | adequate equity in your IRA or 401K to pay the |
| $10,000 or less to the IRS, you are eligible for this type | | | | balance due. |
| of IA, provided you meet the following criteria: | | | | The IRS officials will ask you for a complete personal |
| * You have not filed your returns later than the due | | | | or business financial statement, and will calculate your |
| date or defaulted on your returns in the last five years. | | | | monthly payments by taking into account "allowable" |
| * All your returns are filed. * Your monthly installment | | | | monthly expenses. |
| payments will pay off the balance due (plus interest | | | | IRS Installment Agreement Defaults |
| and penalties) in 36 months or less. * You have had no | | | | So, you have defaulted on your installment agreement |
| other installment agreements in the last five years. * | | | | payments to the IRS. What happens now? It is very |
| You agree to file your returns and pay your taxes on | | | | important to know that the IRS must send you a |
| time in future. | | | | notice of default before it starts collection activity. This |
| The IRS will not file a federal tax lien under a | | | | notice is called "Notice of Intent to Levy!!! You |
| guaranteed installment agreement. This is helpful as tax | | | | Defaulted on Your Installment Agreement." After the |
| liens have a negative impact on your credit rating. | | | | IRS sends this notice, you have 30 days to file an |
| Streamlined Installment Agreements: You are eligible | | | | appeal to renegotiate the installment agreement. If you |
| for a streamlined installment agreement if your balance | | | | file the appeal within 30 days, the IRS cannot take any |
| is less than $25,000, and you agree to pay off the | | | | collection action or enforce the default until your appeal |
| balance due (plus interest and penalties) in 60 months | | | | hearing is completed. This is mandated by law - Internal |
| or less. Under a Streamlined Installment Agreement the | | | | Revenue Code 6159(b) (5) - and by the Internal |
| IRS is not likely to file a federal tax lien. Like a | | | | Revenue Manual (IRM 5.14.11.9). |
| Guaranteed Installment Agreement a taxpayer must | | | | Renegotiating your installment agreement protects |
| have all tax returns filed prior to the agreement and | | | | your bank accounts and other assets from IRS |
| must agree to file tax returns and pay taxes on time in | | | | collection agents, till you negotiate a whole new plan |
| the future. | | | | for repayment of your liabilities. If you are still unable to |
| Partial Payment Installment Agreements: This type of a | | | | repay your IRS debt, other options available to you |
| payment plan is suitable if your minimum payments due | | | | include Offer in Compromise (OIC), bankruptcy or |
| do not meet the criteria set by the guaranteed and | | | | being placed in IRS uncollectable status. |
| streamlined installment agreements. A Partial Payment | | | | Installment Agreement Benefits |
| Installment Agreement can be used regardless of the | | | | An installment agreement gives you, the taxpayer, |
| amount owed. In this case, your monthly payment is | | | | adequate time to pay off your taxes in an orderly |
| based on what you can afford after deducting your | | | | manner. As long as you are able to pay off what is |
| living expenses. The downsides of this plan are that | | | | owed by you, IRS collection agents would never |
| the IRS is more likely to file a federal tax lien and you | | | | bother you. Eligible individuals can get a six-month |
| will be asked to fill out Form 433-F to report your | | | | extension for filing their tax returns and possibly paying |
| assets, income, and expenses and provide bank | | | | their tax bills if they are under certain financial |
| statements and possibly other documentation for the | | | | hardships. These are all highlighted, along with eligibility |
| past three months. | | | | factors in Form 9465. |
| Non-Streamlined Installment Agreements: If your | | | | |