It’s never a great feeling to be hit with an unexpected tax bill, especially given the fact that the Internal Revenue Service has powerful collection methods that can wreak havoc on an individual’s life. Fortunately, those individuals who owe less than $25,000 in taxes for all years can enter into a streamlined installment agreement. Through this process, the IRS grants an individual up to 72 months to pay off the debt, which is usually broken down into monthly payments. Those with tax liabilities up to $50,000 may qualify for one of these installment agreements, but only if payments are made through direct debit or payroll deduction and there hasn’t been a default on a previous installment agreement within the last year. There are a number of other rules and requirements that pertain to streamlined installment agreements.
But what about those who owe more in back taxes? These individuals and businesses may still be able to qualify for a payment plan referred to as a non-streamlined installment agreement. This type of agreement is for those who don’t qualify for a streamlined installment agreement and don’t want to negotiate an offer in compromise. These non-streamlined agreements last longer than streamlined agreements, meaning that more time can be had to pay back taxes, and they are entirely income based. Additionally, once the collection period runs, the IRS will write off any remaining balance under the agreement.
Certain steps must be taken before being approved for a non-streamlined agreement. Perhaps the most important is submitting IRS Form 433-F, which lays out an individual’s cash flow, assets, debts and other detailed financial information. The IRS has the ability to analyze this information and negotiate to determine whether it wants to offer a non-streamlined installment agreement. In other words, these agreements are not automatically given. Instead, they must be negotiated.
Sometimes it can feel like the IRS is being overly aggressive in its efforts to collect back taxes. This can be stressful, and the reality of having to pay back thousands, perhaps even tens of thousands of dollars can be overwhelming. The good news is that those who owe back taxes have options, including the possibility of pursuing collection alternatives if appropriate.