Your Guide To IRS Streamlined Installment Agreements

If you don’t take action to resolve your past due tax balance, the IRS has the authority to levy a host of enforcement actions against you. These actions could include seizing your property or taking a portion of your paycheck before you receive it. The good news is that there are several IRS tax resolution options you can use to your advantage, including applying to a streamlined installment agreement (SIA). A streamlined installment agreement allows you to pay the tax you owe over time, rather than requiring a lump sum payment.

This relief option is part of the IRS’s Fresh Start initiatives, which have been making it easier for citizens to find tax relief for over 10 years. Some of the biggest reasons you might want to opt for a streamlined installment agreement are that the payment terms are flexible, the arrangement will protect you from the collection efforts mentioned above, and you don’t have to provide detailed financial information to get approved.

Learn more about this crucial IRS tax relief option and how our tax resolution experts at Damiens Law can help you get right with the IRS below.

Key Takeaways

• What is a streamlined installment agreement? Monthly payment plan that doesn’t require financial details to set up.

• Benefits – Protection from IRS collection actions, flexibility with your payment terms, and no need to disclose specific financial information.

• Terms – This payment plan requires you to fully repay what you owe, including interest and penalties which continue to accrue until the balance is paid in full, within 72 months or before the collection statute expiration date.

• You must make at least the minimum monthly payment to stay in good standing.

Introduction to Installment Agreements

Installment agreements are payment plans offered by the Internal Revenue Service (IRS) that allow taxpayers to pay off their federal tax debt in manageable monthly payments, rather than requiring the full amount upfront. These payment plans are designed to help both individual taxpayers and businesses resolve their tax liability over time, making it easier to stay compliant and avoid more severe IRS collection actions.

The IRS offers several types of installment agreements, with streamlined installment agreements being one of the most accessible options. Streamlined installment agreements simplify the process for taxpayers who owe $50,000 or less in tax debt, allowing them to set up a payment plan without the need for extensive financial documentation. For businesses, the threshold is $25,000 or less in tax debt, and the balance must be paid off within two years. By taking advantage of these payment plans, taxpayers can address their tax liabilities in a way that fits their financial situation, while also stopping additional penalties and interest from accumulating as quickly.

Whether you’re an individual or a business, the IRS offers payment plans that can help you regain control over your finances and resolve your federal tax debt efficiently. If you qualify for a streamlined installment agreement, you can benefit from a straightforward application process and flexible monthly payments tailored to your needs.

What is a Streamlined Installment Agreement?

A streamlined installment agreement is a type of arrangement with the IRS that allows a taxpayer with unpaid taxes (including income tax, trust fund, and other assessments) to pay off what they owe in monthly payments over a specific period of time. The purpose of this arrangement is to allow the IRS to collect what they’re owed and the taxpayer to avoid further collection efforts.

This type of payment plan simplifies tax debt repayment by making it extremely easy on both the IRS and the taxpayer. In general, as long as you can pay off what you owe within six years, the IRS won’t request further financial information or details about your assets. Eligibility for streamlined agreements is based on the aggregate unpaid balance of all balances due to the IRS.

One of the key highlights of applying for this type of debt relief is that there is far less paperwork involved, which means you’re likely to get approved faster. Another great thing about this type of agreement is that it can help you potentially avoid IRS liens.

Streamlined agreements are available for taxpayers with an unpaid balance below certain thresholds, making them accessible for those with qualifying balances due.

Streamlined Vs. Other Types of Installment Agreements

A streamlined installment agreement is only one of the many types of payment plans you can apply for through the IRS. Taxpayers may qualify for a streamlined agreement under the following circumstances, such as owing less than a certain threshold and meeting compliance requirements. Here’s how they differ from other payment options:

• Direct debit – A direct debit IRS payment plan allows taxpayers to pay off their debt with automatic bank withdrawals each month. It’s possible for you to make your streamlined installment agreement payments via direct debit.

• Partial payment installment agreement – A partial payment plan allows taxpayers to pay back as much of their tax debt as possible before the statute of limitations runs out on collections. But it also forgives whatever portion the taxpayer can’t pay by that point.

• Guaranteed – A guaranteed streamlined agreement is a good option if you owe less than $10,000, can pay it off within three years, and have a history of compliance. These arrangements are a subcategory of streamlined installment agreements because they don’t require a collection information statement.

• Non-streamlined installment agreement – Allows taxpayers who owe over $50,000 to set up payments with the IRS. But generally, they must file a collection information statement and may need to meet other criteria. When evaluating eligibility, the IRS reviews all relevant tax modules, including pre-assessed periods, to ensure all outstanding liabilities are considered. Briefly, the IRS offered these arrangements to taxpayers owing up to $250,000 without requiring a financial statement, but at the time of writing, that option may no longer be available.

Federal Tax Debt

Federal tax debt is the total amount of money owed to the IRS for unpaid taxes, including any applicable penalties and interest. This debt can result from a variety of situations, such as not filing tax returns on time, underreporting income, or simply being unable to pay the full amount of tax liabilities when due. Over time, penalties and interest can significantly increase the balance due, making it even more challenging to pay off.

To help taxpayers manage their federal tax debt, the IRS offers installment agreements that allow for repayment over time. When applying for an installment agreement, taxpayers may need to provide financial information so the IRS can assess their ability to pay. This includes details about income, expenses, assets, and other liabilities. The IRS uses this information to determine the most appropriate payment plan for your situation, ensuring that the monthly payment amount is manageable based on your financial circumstances.

By setting up an installment agreement, you can avoid more aggressive collection actions and work towards resolving your tax debt in a structured way. The IRS offers several options to fit different financial situations, so it’s important to review your options and choose the payment plan that best meets your needs.

Benefits of a Streamlined Payment Plan

One of the biggest benefits of agreeing to a streamlined payment plan is that you won’t continue to incur new IRS collection actions. IRS Interest and tax penalties will continue to accrue until your balance is paid off, though. Note that the only penalty that may accrue is the failure to pay penalty, but it drops to 0.25% per month and caps out at 25% of the assessed balance. A user fee applies when setting up the agreement, but low income taxpayers may qualify for a reduced or waived fee.

Another advantage of a streamlined payment plan is that there isn’t any financial disclosure or collection information statement required for approval. In most cases, you will be able to avoid an IRS tax lien by agreeing to this type of plan. Best of all, this type of tax payment plan offers flexible payment terms and payment methods, including direct debit from a checking account, that extend up to 72 months.

Eligibility Requirements

Not every taxpayer who owes a tax debt is eligible to apply for a streamlined installment agreement plan. Taxpayers must meet all filing and payment requirements, including being current on all required tax returns and estimated payments. Any missing tax returns must be filed before an agreement can be approved. Below, we’ll go over the various eligibility requirements you’ll need to meet to be approved for this type of tax debt relief.

If a taxpayer’s disposable income is insufficient to meet the payment requirements, the IRS may require additional documentation or consider alternative arrangements.

Categories

Prior to the Fresh Start initiatives, the maximum dollar threshold for streamlined installment agreements was $25,000, but it has since been raised to $50,000. Taxpayers must make at least the minimum payment required by the IRS to qualify for these agreements. The maximum term has also been extended from 60 months to 72 months.

These categories are based on the total balances due to the IRS, which determines eligibility and the specific requirements for each streamlined installment agreement.

Balances of $25,000 or Less

The first category you can qualify for requires you to owe no more than $25,000 and be able to pay off your debt in full within 72 months. This 72-month period must fall prior to the Collection Statute Expiration Date (also known as the Collection Statute Expiration Date (CSED)). Taxpayers must be current on all their tax filings and up-to-date on estimated tax payments.

Balances Between $25,001 and $50,000

To qualify for the second category of streamlined installment agreement relief, you must owe between $25,001 and $50,000. With this plan, you also need to be able to pay off your debt in full within 72 months. Taxpayers must be current on all their tax filings and up-to-date on estimated tax payments.

Notably, you must agree to direct debit payments if you fall into this category – you can set up direct debits to come out of your bank account monthly or ask your employer to do payroll debits (where your employer withholds the money from your check and sends it to the IRS).

For higher balances within this range, a revenue officer may be assigned to review your case, evaluate your taxpayer information, and ensure compliance with IRS procedures regarding liabilities and payment plans.

Understanding Installment Payments

Installment payments are the monthly payments you make to the IRS under an installment agreement to pay down your tax liability. The amount of each payment is typically based on your ability to pay, which is determined by reviewing your financial situation, including your income, expenses, and other obligations. This ensures that your payment plan is realistic and sustainable over the long term.

There are several ways to make your monthly payments, including direct debit from your bank account, payroll deduction through your employer, or by sending a check or money order. Many taxpayers choose direct debit installment agreements because they offer convenience and reduce the risk of missing a payment. You can also adjust your payment amount or payment date if your financial situation changes, either by contacting the IRS or modifying your existing installment agreement online.

It’s crucial to make your installment payments on time each month to avoid defaulting on your agreement. Missing payments can result in additional penalties and interest, and may even lead to the IRS terminating your payment plan. By staying current with your payments, you can steadily reduce your tax liabilities and avoid further collection actions.

Application Process

Applying for a streamlined installment agreement involves gathering the necessary information, obtaining the necessary forms, and properly submitting everything to the IRS.

During the application process, the IRS may file a Notice of Federal Tax Lien to protect its interest in the outstanding debt.

Step 1: Verify Tax Balance and Compliance Status

First, you need to verify your overall tax balance before you make an installment agreement request. You can do this by logging into your IRS tax account and reviewing your balance, making sure to check all balances due for each tax year, or getting in touch with the IRS. While doing so, you’ll also want to verify your compliance status. Make sure that you’re up to date when it comes to filing your returns and making any estimated tax payments. If you aren’t, then you’ll first need to get caught up and compliant.

Step 2: Complete IRS Form 9465 (Installment Agreement Request)

Next, you need to complete IRS Form 9465. You can complete this form either digitally online or on paper. You can download the correct forms online and print them off if you want to complete a hard copy of the form.

Step 3: Submit Application (online, by mail, or by phone)

Next, you can submit the application either by sending your copy through the mail to the Department of Treasury address in your jurisdiction, over the phone, or online. In general, applying online is the fastest and most preferable option. It also leads to the fastest processing times. You can apply online through the IRS’s Online Payment Agreement tool, or if applying for the current year’s taxes, you may be able to attach a copy of Form 9465 to your e-filed tax return.

Costs and Fees

If you apply online and set up direct debit payments, the set-up fee is just $22. If you set up direct debit and apply on the phone, through the mail, or in person, the fee is $107. Both fees may be waived if you qualify as low-income. 

If you don’t set up direct debits, the fees are as follows: online – $69; phone, mail, or in-person – $178; or low-income – $43 with the possibility for reimbursement. 

Special Considerations

If you owe $50,000 or less in tax debt, you may qualify for a streamlined installment agreement, which offers several advantages. With this type of payment plan, you can repay your tax debt over a period of up to 72 months without having to provide detailed financial information to the IRS. This makes the process faster and less intrusive, allowing you to focus on making your monthly payments.

One of the key benefits of a streamlined installment agreement is that the IRS generally will not file a federal tax lien as long as you remain in compliance and make your payments on time. However, if you default on your agreement, the IRS may file a tax lien to secure the remaining balance due. For taxpayers experiencing financial hardship, the IRS may allow for a temporary reduction or suspension of installment agreement payments, helping you avoid default during difficult times.

In certain circumstances, if you are unable to pay your full tax debt, the IRS offers other options such as an Offer in Compromise, which allows you to settle your tax liability for less than the total amount owed. It’s important to review all available options and choose the one that best fits your financial situation, ensuring you can resolve your tax debt and move forward with confidence.

Tips for Success

The best way to ensure that your installment agreement plan works is to make payments on time when they are due. Defaulting on your payments is a major issue that could even result in your plan being canceled.

It’s also a great idea to consider monitoring your IRS account regularly to make sure that your payments go through on time. If any problems arise, then you’ll want to know how to resolve an IRS issue

If you ever experience an inability to pay or a financial hardship during your plan, you must contact the IRS immediately.

Alternatives for Those Who Don’t Qualify

Are you currently considered ineligible for a streamlined installment agreement? If so, then one option you have is to pay down your tax debt until it’s below $50,000. At that point, you may be eligible for the agreement. You may also want to request penalty abatement to lower your balance owed.

Another option you have is to consider other IRS tax resolution options. In particular, you can request monthly payments on a larger tax balance, but you will generally need to file a financial disclosure.

An offer in compromise agreement allows the taxpayer to pay less than the full tax debt in exchange for timely, consistent payments. A partial pay agreement is similar in that it allows the taxpayer to pay off a portion of their balance before having the rest forgiven.

If making any sort of payment would put you in financial distress, then your best option is to consider filing for currently noncollectible status. This status alerts the IRS that you aren’t able to make payments, so they won’t continue to attempt to collect from you.

FAQs

Do you have more questions about streamlined installment agreements, applying for them, or your tax debt relief options? If so, then talking with a tax resolution specialist is your best option to ensure that you get advice that considers your unique circumstances. That said, we’ll provide some basic answers to some general questions below.

Can businesses apply?
Yes, businesses can apply for streamlined installment agreements. It’s important to note that businesses may also be liable for the trust fund recovery penalty, which can sometimes be included in certain installment agreements. Interest and penalties may also apply depending on your account status.

Can businesses apply?

Out-of-business sole proprietors may qualify for a streamlined installment agreement. 

In-operation businesses can apply for an IRS installment agreement to resolve income taxes, payroll taxes, or some civil penalties, but the terms vary. Typically, the IRS requires a collection information statement for any in-operation business that owes more than $25,000 or needs more than 24 months for repayment.

What if I miss a payment?

It’s critical that you don’t miss a payment on your streamlined installment agreement because if you do, you risk invalidating the entire payment plan. Thankfully, taxpayers can usually miss one payment a year without default. Generally, you just need to make up the payment within 30 days.

Will the IRS file a lien?

The IRS has the authority to file a lien against you even if you’re currently on a streamlined installment agreement with them. This lien is designed to protect the tax agency’s best interests. While a levy actually takes your property, a lien will simply remain in place as a legal right until you pay off what you owe.

Streamlined installment agreements are usually a great option for citizens who want to repay their past-due tax balance but need some time to do so. A streamlined agreement might be preferable to other types of tax debt relief options if you’re looking for flexible payment terms and don’t want to have to provide a plethora of financial documentation to secure the agreement.

The best way to ensure you get approved for this type of debt relief is to get in touch with the IRS as early as possible about paying back your debt. Before you get in touch, though, it might be best to run your entire tax situation by a tax professional.

Here at Damiens Law, our team of tax debt experts has been focusing on providing tax relief to clients since 2011. Schedule a short, no-obligation 15-minute discovery call with our team now to learn more about your tax options today.