Want to Space Out Your Tax Payments? Achieve Relief Through an IRS Installment Agreement
It is not uncommon for individuals and businesses to find themselves with large tax liabilities that they are unable to pay. In certain situations, payments may be made over time toward these liabilities. An Installment Agreement is an arrangement by which the Internal Revenue Service allows individuals and businesses to pay their tax liabilities over time.
The two main advantages of installment agreements are:
- They allow payments to be made over time rather than requiring full payment up front
- They stop enforced collection actions, meaning the IRS generally may not serve a levy to collect taxes owed while an installment agreement is in effect
Keep in mind that there are some disadvantages as well, such as:
- Interest and penalties continue to accrue until the tax liabilities are paid in full
- The IRS still may file a Notice of Federal Tax Lien
In most cases, however, the advantages of an installment agreement will far outweigh the disadvantages.
Who is eligible for an Installment Agreement?
To qualify, you will need to disclose all of your assets and cash to the IRS. If you have adequate cash, funds in a retirement account, equity in your house you can borrow against, or the ability to borrow the amount owed, the IRS will not accept a request for an installment agreement.
Your eligibility may also depend on the type of installment agreement that you wish to pursue.
Guaranteed installment agreements are automatically granted for individuals with income tax liabilities of $10,000 or less (exclusive of penalties and interest).
Streamlined installment agreements are available to individuals with liabilities equal to $50,000 or less. Businesses which are no longer operating also may be eligible for a streamlined installment agreement.
Express installment agreements may be the proper course of action for operating businesses which owe less than $25,000 in employment taxes.
For all three of these kinds of installment agreements, if you owe more than the limit, you may pay down the liability before entering into the agreement in order to qualify. For tax liabilities larger than $50,000, an installment agreement generally must be negotiated with an IRS revenue officer. The IRS will review your monthly income and expenses, compare them with their allowable monthly expenses, and determine the monthly amount it deems that you are able to pay.
Each type of installment agreement has other specifications and specific criteria that applicants must fulfill in order to qualify. Contact our office today to discuss your tax circumstances and see whether or not you could qualify for tax relief through an installment agreement.