IRS Streamlined Installment Agreements
Make Monthly Payments on Your Tax Bill Without Providing a Financial Disclosure
If you can’t afford to pay your IRS taxes in full, you may qualify to make monthly payments. With a streamlined installment agreement, qualifying taxpayers can set up a payment plan without providing any financial information. However, you must owe $50,000 or less in tax, penalties, and interest, and you must meet the other application requirements.
Curious? Then, keep reading for a look at the details. Or contact us directly. At the W Tax Group, our tax attorneys have helped people from all over the country resolve their state and federal taxes, and we can help you find the right solution for your unique situation.
What Is a Streamlined Installment Agreement?
A streamlined installment agreement is a monthly tax payment plan that doesn’t require a financial disclosure to set up. It’s called a streamlined agreement because the application process is streamlined and doesn’t involve a lot of paperwork. To qualify, you must owe less than $50,000 in tax (not counting penalties and interest) and you must be able to pay off your balance in 72 months or by the collection statute expiration date.
If you owe more than $25,000, you must set up the monthly payments to come automatically out of your bank account. Alternatively, you can opt to have the payments deducted from your paycheck and sent to the IRS by your employer. If you cannot do either of these options, the IRS requires you to submit a financial statement, and thus, you may be able to make monthly payments but you are no longer eligible for the streamlined agreement.
How to Apply for a Streamlined Installment Agreement
You can apply for a streamlined agreement online using the IRS’s Online Payment Agreement (OPA) tool or by filing Form 9465 (Installment Agreement Request). In both cases, you need the following details to apply:
- Name, Social Security number, and contact details.
- Tax form filed — For instance if you’re applying for payments on individual income tax, note Form 1040.
- Tax period — For instance, if you are applying to make payments on payroll taxes from the first quarter of 2021, you should note January 1, 2021, to March 31, 2021.
- Business name and EIN if you’re applying on behalf of a business.
- The total amount of your tax debt, penalties, and interest.
- Any additional tax balances — For instance, if you are already paying taxes on an installment plan, you will need to note the amount you owe.
- Proposed monthly payment — Again, your minimum monthly payment must be enough to pay off the taxes within 72 months or by the end of the collection statute.
- The date you want to make your monthly payment.
Applying online is the easiest option. It’s also cheaper. It only costs $31 to request a payment plan online as long as you set up direct debits. If you want to pay by check, credit card, or money order, the application fee is $149. In contrast, if you use a paper application, the fees are $107 and $225 respectively.
If you qualify as low-income, you don’t have to pay the set-up fee as long as you can make your payments through direct debit. If you cannot do direct debit, the IRS will reimburse your fee when you successfully complete your installment agreement.
What to Expect After You Apply
The IRS responds to most installment agreement requests within 30 days. However, if you’re applying for a payment plan related to a tax return filed after March 31, the process may take longer. You don’t have to make monthly payments while you wait for approval, but you may want to send any payments that you can afford to make.
If you meet the requirements for a streamlined plan, the IRS will generally accept your application. Mark your calendar so that you know when the payments are going to come out of your bank account every month. If you opted to pay through the mail, keep an eye out for the payment voucher, or make sure that you remember to sign into your online IRS account to make your monthly payments.
Typically, the IRS only rejects streamlined installment agreement requests if you cannot afford to make the minimum monthly payments or if you don’t meet some of the other eligibility criteria. In this case, your tax debt will be due in full, but you may be able to apply for another IRS program. Talk with a tax professional to find the best option for your situation.
Rules for Taxpayers on IRS Payment Plans
When you’re on a monthly payment plan, you must stay current with your tax filing and payment obligations. You also must make your monthly payments on time. Note that not receiving a payment voucher is not a valid excuse for missing a monthly payment. The IRS expects you to make the payments on time every month regardless of whether you receive a reminder.
If you miss a payment or fail to pay current taxes due, the IRS can consider your plan in default and demand full payment. At that point, the IRS may issue a federal tax lien or move forward with a wage garnishment or asset seizure.
If this happens, you have the right to appeal through the Collection Appeals Program. This gives you a chance to explain your situation and suggest alternatives. In some cases, the IRS will allow you to roll new tax debts into an existing payment plan, but this isn’t guaranteed. To be on the safe side, make a plan to stay up to date on your current tax obligations.
Minimum Payments on Streamlined Installment Agreement
To calculate the minimum payments on your installment agreement, divide your total tax debt including interest and penalties by 72. For instance, if you owe $7,200, your minimum monthly payment is $100. This gives you six years to pay your tax debt.
However, if the collection statute expires within the next six years, you need to use a shorter time period. The collection statute is the last day that the IRS can collect on a tax date, and it’s 10 years after the tax was originally assessed. To give you an example, imagine that you owe $7,200 and the collection statute expiration date is in 36 months. Then, your minimum monthly payment is $200.
What If You Can’t Make the Minimum Monthly Payments?
If you can’t afford to make the minimum monthly payment, you may want to consider an offer in compromise or a partial payment installment agreement.
An offer in compromise lets you settle the debt for less than you owe, but you must make a lump sum payment or monthly payments over a two-year term. A partial payment installment agreement also lets you pay off the tax debt for less than you owe. You make monthly payments until the collection statute expires, and then, the IRS waives the remaining balance.
In some cases, the IRS may be willing to approve a payment plan even if you can’t afford to make the minimum monthly payment. If the following three elements apply, you won’t be able to set up a payment plan online, but you may still qualify:
- You can’t afford to make the minimum monthly payment.
- You owe more than $25,000 but less than $50,000.
- You’ve defaulted on a payment plan in the past 12 months.
If these conditions apply to your situation, you can apply for a payment plan by filing Form 9465, but you will need to share details about your take-home pay, pay periods, car payments, health insurance premiums, court-ordered payments, and childcare expenses:
Alternatives to the Streamlined Payment Agreement
The IRS offers many different programs for taxpayers who can’t afford to pay their bills in full. Here are some of the other options and a description of when to consider them:
- Short-term payment plan — If you can pay your tax debt in full within 120 days.
- Guaranteed installment agreement — You owe less than $10,000, can pay off the total tax debt in three years, and have filed and paid on time for the last five years.
- Non-streamline installment agreement — For taxpayers who owe over $50,000 in assessed taxes. You may meed to file a collection information statement, and the IRS will file a federal tax lien.
- Partial payment installment agreement — You can’t afford to make the minimum monthly payments on a streamlined agreement, and you’re willing to submit a financial disclosure to the IRS.
- Offer in compromise — You make a financial disclosure to convince the IRS that you can’t afford to pay the full balance. Then, the IRS agrees to let you pay less than you owe.
The above options are all for people who agree with the tax debt that they owe. If you dispute the tax debt, you may need to apply for an offer in compromise based on doubt as to liability. Or if the debt is due to actions your spouse, ex-spouse, or late spouse took without your knowledge, you may want to look into innocent spouse relief.
How to Make Changes to Your Installment Agreement
If you want to change your installment agreement, you can also do so online at the IRS’s website. There is a $10 fee to update your agreement, but again, the IRS waives this fee for low-income taxpayers. Unfortunately, you can only update your plan online if you originally set it up online.
FAQs About Streamlined Payment Plans
To give you a deeper understanding of how these plans work, we’ve gathered the answers to some frequently asked questions. If you don’t see your concern, contact us directly.
What is a direct debit IRS payment plan?
A direct debit payment plan is when you set up monthly payments on your tax debt to come directly out of your bank account. To get approved for a streamlined installment agreement, you must set up direct debits if you owe over $25,000.
What is the difference between a guaranteed and streamlined installment agreement?
A guaranteed agreement is for people who owe $10,000 or less. To qualify, you must be able to pay off the balance in three years, and you and your spouse must have filed and paid on time for the last five years. In contrast, a streamlined agreement is for people who owe up to $50,000, and it’s called streamlined because it doesn’t require a lot of paperwork.
What if you owe more than $50,000?
You can’t qualify for a streamlined agreement if you owe over $50,000 in assessed tax. Note that this amount does not include the penalties and interest on your account.
However, if you make a payment to get the balance under $50,000, you can qualify. Alternatively, you may be able to use penalty abatement to reduce the balance.
What is a non-streamlined agreement?
A non-streamlined agreement is when you set up a payment plan without providing a financial disclosure, but the IRS issues a federal tax lien against you. In 2020, during the COVID pandemic, the IRS started offering non-streamlined plans to people who owe up to $250,000 in tax, penalties, and interest.
If the debt was only related to 2019, the IRS allowed qualifying taxpayers to set up non-streamlined payment plans without filing a federal tax lien.
Can businesses set up streamlined installment agreements?
If you owe business taxes such as payroll taxes and your business is still in operation, you can set up a streamlined agreement if you owe less than $25,000, but you must pay off the balance in 24 months. Closed businesses may be able to set up payment plans for larger amounts of tax debts.
Can you add a new tax liability to your streamlined installment agreement?
You cannot have two IRS payment plans at the same time, but if you incur a new tax liability, the IRS may be willing to add that amount to your existing payment plan. However, this isn’t guaranteed. You still need to be able to pay off the balance by the end of the payment plan’s term, and you may need to prove that you’ve taken steps to avoid repeating this situation in future tax years.
Get Help Applying for a Streamlined Tax Payment Plan
You don’t have to deal with the IRS on your own. We can help you. At the W Tax Group, we leverage our knowledge of the tax code and IRS collection processes to get the best results possible for our clients.
When you contact us, we don’t force you into the most popular program or make promises we can’t keep. Instead, we talk with you about your situation, and then, we help you customize a solution that helps you get out of tax debt as quickly and inexpensively as possible.
Don’t let the IRS pursue collection actions against you, and don’t let your tax debt keep growing with interest and penalties. Instead, get help by contacting us today.