There are a number of IRS payment plans available to help you get relief from your tax debt. If you don’t qualify for an Offer in Compromise, these IRS installment agreements can stop the IRS from issuing a IRS levy or IRS wage garnishments. In some cases, an IRS payment plan can even stop the IRS from filing a Federal Tax Lien.
What is an IRS payment plan?
Believe it or not there are new laws that have gone in to effect to help taxpayer’s that have trouble paying their tax debt. The IRS now offers a number of payment plan options which allow you to pay all (or some) of your tax debt over a period of time.
While the structure of IRS payment plans may vary depending on the specific facts of your case, generally speaking, an IRS payment plan will allow you to pay your tax debt over time.
What is an IRS installment agreement?
An IRS installment agreement is the technical term for IRS payment plan. These terms can be used interchangeably. When we are speaking with the IRS, we would refer to these IRS payment plans as installment agreements.
However, because people tend to use the term “payment plan”, that’s the term we use here.
How do IRS payment plans work?
To start, in order to qualify for IRS payment plans, you must be in tax compliance. This means that you have filed at least the past six years of returns and made any required estimated tax payments (if applicable). If you are not currently compliant, that’s ok. We help our clients file unfiled tax returns and then apply for an IRS installment agreement.
The exact structure of IRS payment plans depends on several factors:
- The amount of your tax debt;
- The age of your tax debt;
- Your income;
Why does the amount of my tax debt affect the installment agreement?
The amount of your tax debt matters because it will determine which IRS payment plans you’re eligible for:
- Less than $10,000: Guaranteed Installment Agreement
- Less than $50,000: Streamlined Installment Agreement (Fresh Start Initiative)
- Less than $100,000: 84 Month Installment Agreement (Pilot Program)
- Greater than $100,000 generally requires special negotiations with a Revenue Officer
We will address each of these programs more below. Each program provides for a different amount of time to repay.
Why does the age of my tax debt affect the installment agreement?
Unless you are entering into a partial pay installment agreement, the IRS will require the full balance of your debt be paid prior to the collection statute expiration date. This is generally 10 years after you file your tax return.
So while you may be able to pay your taxes over 72 months in a Streamlined Installment Agreement, the IRS will not allow you to do that if you only have 60 months left on your collection statute expiration date. In that case, you’d be limited to a 60 month repayment plan.
As you can see, the age of your tax debt can affect how long your payment plan can last.
Why does my income affect the installment agreement?
Your income generally only matters if your tax debt is over $50,000. If you qualify for the Streamlined Installment Agreement, very little income information is required. However, if your debt is above $50,000, you will be required to provide detailed information about your income. The IRS may require you to pay as much as you are able to afford in this case.
This is where an experienced tax attorney comes into play. We know how these income statements work. We know which expenses are allowable and know how to argue with the IRS about how much you should be required to pay. Without a tax attorney negotiating your installment agreement, you may overpay!
What if I can’t afford an IRS payment plan?
If you can’t afford any of the IRS payment plans, we would typically look at other options. This would often be an Offer in Compromise, Currently Not Collectible Status, or a partial pay installment agreement.
The IRS is not permitted to force you to pay if it would result in a financial hardship.
Do IRS payment plans show up on credit report?
No! The IRS does not back taxes to the credit reporting bureaus so there is no reason that your tax debt (or an IRS payment plan) would show up on your credit report.
However, if the IRS files a Federal Tax Lien, your creditors would be able to see it. Federal Tax Liens are filed in offices of public record.
The good news is that some IRS payment plans, like the Streamlined Installment Agreement, can actually stop the IRS from filing a Notice of Federal Tax Lien.
Do IRS payment plans affect your credit score?
No! Because the IRS does not report back taxes to the credit reporting bureaus, there is no affect on your credit score.
However, as we stated above, if the IRS files a Federal Tax Lien, your creditors would be able to see it. Federal Tax Liens are filed in offices of public record. This can affect your ability to get credit.
What IRS payment plans are available?
The IRS has three standard IRS payment plans available:
- Guaranteed Installment Agreement
- Streamlined Installment Agreement (a/k/a “Fresh Start Initiative” or 72 Month Installment Agreement)
- 84 Month Installment Agreement (IRS Pilot Program)
Aside from these standard IRS payment plans, the IRS offers a partial pay installment agreement if you cannot afford or do not qualify for any of the above options.
If your debt is over $100,000, the IRS will negotiate a custom payment plan for you, but you will not qualify for any of the standard IRS payment plans above.
Guaranteed Installment Agreement
The IRS guaranteed installment agreement is available in limited cases where a taxpayer owes less than $10,000 (excluding penalties and interest). There are specific requirements that a taxpayer must meet to qualify for this program. In most cases, a taxpayer who qualifies for a guaranteed installment agreement will also qualify for a streamlined installment agreement such as the “Fresh Start Initiative”.
72 Month Installment Agreement (Fresh Start Initiative) (Streamlined Installment Agreement)
The new IRS 72 Month Installment Agreement is sometimes called the “Fresh Start program” or “Fresh Start Initiative”. This program is also referred to as the Streamlined Installment Agreement. This program helps individual taxpayers who owe less than $50,000 and wish to enter into an installment agreement which allows payment over 6 years (72 months).
There are many advantages to this program. For example, the IRS will not generally require a financial statement; however, they may need some financial information from the taxpayer. Starting the program also means you are in good standing with the IRS so they will not take any additional collection actions. We can also use this program to release a federal tax lien!
84 Month Installment Agreement (IRS Pilot Program)
What if you have more than $50,000 in tax debt? Not a problem. The IRS started a new pilot program which allows for an 84 Month Installment Agreement. To qualify, your total tax debt must be between $50,000 and $100,000.
The main advantage of this program is that it provides more time to pay and you can qualify with a higher amount of debt.
Partial Pay Installment Agreement
Unlike the 72 month and 84 month installment agreements, a Partial Pay Installment Agreement allows a taxpayer to pay less than the full amount of their tax debt. Generally, if you cannot afford payments under the Fresh Start program or the 84 Month Pilot Program, you may qualify for a partial pay installment agreement.
However, unlike the 72 Month and 84 Month Installment Agreements, you may be subject to thorough financial review. The IRS can increase your payments if you have an increase in income.
Where can I get more information about IRS payment plans?
If you’re looking for more information about IRS payment plans, you can request a free copy of our book, The Essential Tax Resolution Survival Guide. As part of the ARM Yourself With Knowledge series, this guide aims to help you navigate the tax resolution process and what happens afterward.
Our tax attorneys have experience applying for IRS payment plans
We have experience helping taxpayers like you eliminate hundreds of thousands of dollars in tax debt. When we analyze your tax situation, we try to determine the best course of action for you.
At ARM Lawyers, our tax attorney handles tax cases nationwide and has offices in Pennsylvania, Maryland, New Jersey, and New York. For more information about the tax process in your state, feel free to click below:
- Pennsylvania tax lawyer
- Maryland tax lawyer
- New Jersey tax lawyer
- New York tax lawyer
If IRS payment plans look like an option for you, contact us for a free consultation with a tax attorney
Now more than ever, the IRS is offering flexible IRS payment plans to help you resolve your tax debt. Now is the time to take advantage of these less-stringent, more flexible programs before the IRS changes its mind again. Call now to schedule your free consultation so we can resolve your debt and start you on your path to relief.
Take back control of your financial future. Providing both immediate relief and long-term solutions, tax resolution could be the answer you have been looking for. Our tax attorneys strive to make this process as easy as possible by offering flexible payment options and financing.
Contact our law office today to schedule a free consultation! Call or reach out to your closest office:
- Stroudsburg Pennsylvania tax lawyer
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The best part is that we can start the whole process over the phone or by video conference so you don’t even need to come into the office! We make everything as easy as possible for you from start to finish. Call us today.