IRS installment agreement enables the taxpayer to pay the taxes in a monthly basis to make the payment of debt more manageable. Usually, a taxpayer is subjected to several requirements to be qualified including the review of tax liabilities.
There are four basic forms of installment agreement: (1) the Guaranteed Installment agreement which can cater taxpayers with a total outstanding due of 10,000 USD or less; (2) the Streamlined Installment which can cater taxpayers with a total outstanding due of 50,000 USD or less; (3) the Non-streamlined Installment agreement which can cater taxpayers with a total outstanding due of over 25,000 USD; and , (4) the Partial Agreement Installment which can be applied if the taxpayer cannot afford the payment under Guaranteed and the Streamlined.
Basically, the IRS approves a tax installment plan by the following criteria:
- For Guaranteed, Streamlined and Non-streamlined installments, taxpayers should agree to a monthly installment that will pay the outstanding tax balance in less than 36 months, 72 months and 5 years respectively. The taxpayer and the tax agency can negotiate on the amount to be paid by installment provided that the taxpayer can comply with all its dues at the end of given period or less.
For Guaranteed Installments, the minimum monthly installment the tax agency could give is your outstanding tax balance including the penalties and interest divided by 30.
Meanwhile, for Partial Installments the monthly payment depends on what the taxpayer can only afford.
- Taxpayers who have not filed tax in the past five years may apply for the settlement plan. A taxpayer may also apply if taxes are always paid late in the past five years. These criteria show the taxpayers incapacity to give its dues in one full payment.
- Taxpayers who duly comply with the filing of tax returns may be eligible to apply for the settlement. Under this criterion, the IRS may look at the documents to prove that the taxpayer filed all tax returns.
- All taxpayers must agree to file tax returns and pay future tax on time. The tax agency and the taxpayer must agree with this term to facilitate approval of the installment settlement plan.
- Taxpayers should have no installment agreement in the past five years.
Aside from these general criteria, each installment agreement plan has its own requirements that the taxpayer should comply in order to qualify. The taxpayer should be aware of each plan first to know which one they are qualified with.
Though all of the agreement plans are negotiable, IRS has strict rules to follow when a taxpayer applies to these installment plans. It is important to note that one must be guided properly in choosing the best tax agreement plan to apply to. Consult your professional tax advisor for help!