Resolve Your IRS Debt: Installment Agreements

As an alternative to the Offer in Compromise (OIC) program, if you find yourself with a tax debt to the IRS and/or the State of Vermont that you are unable to pay in full at one time, you might consider requesting a payment plan.  

The IRS offers several types of payment plans, called Installment Agreements (IA), depending upon the taxpayer’s circumstances:

• Streamlined Installment Agreements
  – If your total unpaid tax debt, including assessed interest and penalties does not exceed $50,000, the IRS may approve you for this type of IA;
  – The minimum monthly payment under this type of IA is the total amount owed divided by 72.
  Example:  $50,000 owed/72 = $694.44 minimum monthly payment.

• Guaranteed Installment Agreements
  – Under certain circumstances, if your total IRS debt is $10,000 or less, the IRS is required to allow you to pay according to an Installment Agreement.  The general guidelines are:
    – – you cannot pay the tax immediately;
  – – you agree to pay the full amount owed within three (3) years;
  – – you agree to file and pay all tax returns during the term of the agreement;
  – – you have not entered into an installment agreement during the preceding five
        taxable years;
  – – you have filed and paid all income tax returns during the preceding five taxable years.

• In-Business Trust Fund Express Installment Agreements
  – The IRS may approve an express installment agreement for business taxpayers who have an aggregate unpaid balance of $25,000 or less, including assessed penalties and interest.  Under this arrangement:
  – – The amount owed must be paid within 24 months or before the statute of limitations runs out on the debt, whichever is earlier;
  – – No financial statement is required.

• Partial Payment Installment Agreements
  – Under this arrangement, you make monthly payments to the IRS towards your tax debt, but the payment amount is less than under a traditional Installment Agreement.  In order to apply, you will complete a financial statement form, the 433-A or 433-B, disclosing to the IRS information about your assets, liabilities and income. In addition, you must meet at least the following criteria:
  – – You owe more than $10,000 in combined taxes, penalties and interest;
  – – You have filed all prior-year tax returns;
  – – You have some ability to pay, but cannot pay the entire tax debt;
  – – You are not in bankruptcy;
  – – You cannot sell or access equity in assets to cover the tax debt.  

Whether to apply for an Installment Agreement and if so, which type, requires careful consideration of your unique circumstances. 

If you are interested in learning more about Installment Agreements, contact Diana at Essex Junction’s locally-owned Tax Resolutions, LLC:  diana@taxresolutionsvt.com for a free consultation or call (802) 662-4127