If possible, the taxpayer should pay taxes as they come due, to avoid unnecessary penalties and interest charges. If this isn’t possible, the IRS has various payment plans that may better fit the taxpayer’s circumstances known as installment plans. The IRS designed installment plans for taxpayers to relieve their tax debt without becoming financially devastated. Depending on your financial circumstances, the IRS could demand a large up front payment. In the installment plan the taxpayer negotiates a monthly payment that simultaneously lessens financial hardship while reducing the tax debt as rapidly as possible to minimize interest and penalties. Working with a tax resolution consultant can help you choose one of the following installment plans that works best for you.
Short-Term Installment Agreement
When using this strategy you seek up to 120 days after the April 15 deadline to resolve your debt. The IRS considers this extension an administrative decision. Therefore eligibility requirements aren’t clearly defined. Your filed petition to IRS will only be approved under certain conditions. Total tax debt must be less than $10,000. And the taxpayer has no other tax debt and has filed all tax returns.
Guaranteed Installment Agreement
This agreement is difficult to get. The IRS guarantees it as long as the taxpayer meets its requirements. The taxpayer must owe $10,000 or less and pay the tax debt within 36 months.
Streamlined Installment Agreement
This agreement is the easiest to get and does not need full financial disclosure. The taxpayer must owe $25,000 or less and must pay the tax debt within 60 months.
Verified Installment Agreement
This agreement is also difficult to get. The IRS wants extra paper work and full financial disclosure. This plan is available to those taxpayers who owe over $25,000 in tax debt or who meet cannot the higher monthly payment needed under the streamlined installment agreement.
Partial Payment Installment Agreement
This installment plan is also difficult to get. This agreement allows the taxpayer to pay less than the total tax debt owed over a stated period of time. The taxpayer is again subject to full financial disclosure.
Long-Term Installment Agreement
The IRS designed this agreement for taxpayers unable to meet monthly bills. The taxpayer can pay the tax debt over a longer period than available in other plans. Long-term payment plans can last up to the 10-year statue of limitations on collecting tax debt.