Installment Agreements & The IRS Fresh Start Program

The IRS will not accept an Offer in Compromise if you can pay your unpaid taxes over time. Our team may be able to negotiate a payment plan with the IRS as a way to resolve your tax debt.

The IRS’s Fresh Start Program offers various types of installment agreements based on what you owe. Here are the different types of installment agreements:

If You Owe Less Than $25,000.00

Individuals who owe the IRS less than $25,000.00 may qualify for a streamlined installment agreement. Installment agreements usually have five-year payment terms. An installment agreement may, however, be extended to a maximum of seven years by the IRS. Your IRS payments can be made manually (i.e., online or via a check) if your tax liability is less than $25,000. If you do not make the payments to the IRS on a monthly basis, you risk defaulting on the installment agreement. As an alternative, the IRS will take the money out of your account each month via direct debit, even though that’s not mandatory. A benefit of this program is that you do not have to disclose financial details to the IRS.

Taxpayer Settles IRS Debt Without Disclosing Income or Assets In this case study, our taxpayer owed about $21,000.00 to the IRS. We were able to quickly negotiate a streamlined installment agreement with the IRS without having to disclose our taxpayer’s income or assets to the IRS. The monthly payment was $437.00 per month. According to our taxpayer, the tax liability was paid in full under the installment agreement in about five years. Case Study

If You Owe Less Than $50,000.00

A streamlined installment agreement is available to individuals with IRS debt of less than $50,000.00 where payments are automatically deducted from their bank accounts per month. Under this program, an installment agreement is typically for five years, like the installment agreement described above. In reality, the IRS can extend the payments out to a maximum of seven years. This program has the advantage of not requiring you to tell the IRS about your financial information. In addition, a federal tax lien that has not yet been filed may be negotiated as a part of the installment agreement. A federal tax lien can be withdrawn from our account if we meet certain conditions.

If You Owe More Than $50,000.00

A Financial Statement is required by the IRS if you owe the IRS more than $50,000.00. Forms 433A or 433F, Financial Statement, are typically required. In an installment agreement, the IRS will assess your ability to pay the IRS and tell you the amount it is willing to accept. When that occurs, the IRS uses something called National Standards, a budget-based series of tables that determine what you should be paying for housing, food, clothing, and transportation. The IRS disallows the difference between what you pay each month for any of these categories and expects you to pay that money to the IRS regardless of whether you have it in your pocket. Further, you must still make payments from credit cards even though the IRS disallows unsecured payments.

Taxpayer Owes $125,000In this case study, our taxpayer owed approximately $125,000.00 to the IRS. We prepared a Form 433A, Financial Statement, and negotiated an installment agreement with the IRS in an amount the taxpayer could afford. The taxpayer ultimately paid up unpaid taxes in full under the installment agreement and no longer has any IRS problems. Case Study

If Your Business Owes $25,000.00 Or Less

If your business owes less than $25,000.00 in payroll taxes (federal Form 941 or Form 944), the IRS can grant an in-business Trust Fund Express installment agreement. However, the unpaid taxes must be paid in full within 24 months.

If Your Business Owes More Than $25,000.00

If your business owes more than $25,000.00 to the IRS, the IRS will demand the filing of a financial statement, typically a Form 433B, Financial Statement. The IRS will also likely demand the filing of Forms 433A, Financial Statements, for the individuals that own and operate the business. The IRS will then review the business’ ability to make payments to the IRS under an installment agreement. Depending on the amount of the unpaid tax liability, the IRS may also propose to assert the Trust Fund Recovery Penalty against the owners, officers, directors, shareholders or other responsible individuals.

The IRS will not grant an installment agreement unless and until you are in full compliance, meaning that all prior tax returns have been filed. The IRS will typically not grant an installment agreement to you if you have unfiled tax returns. While in an installment agreement, you must file all future tax returns when due and pay all of the associated unpaid taxes in full. Failure to do so will cause the IRS to default your installment agreement.

What happens when you default on an existing installment agreement? It is possible that the IRS may be willing to reinstate the installment agreement. However, the IRS is typically less likely to grant another installment agreement when a prior installment agreement was defaulted. Further, the IRS will change the terms and conditions of the reinstated installment agreement, often by typically demanding more money from you on a monthly basis.

We have negotiated thousands of installment agreements with the IRS on behalf of our clients. If you are interested in an installment agreement where you make affordable monthly payments to the IRS, contact Seattle tax lawyers at IRS Trouble Solvers™. Your BEST bet to resolve your IRS Debt!®

What if I can’t pay the amount the IRS wants under an installment agreement?

See Partial Payment Installment Agreement

What if I can’t pay anything to the IRS on a monthly basis because I have no money?

See Deemed Uncollectible