An IRS Installment Agreement, or payment plan, is the primary means by which taxpayers with tax debts settle up with the government. A special provision in the law allows the IRS to accept payment plans without reviewing your financial information, which they are otherwise normally required to do. These simpler payment plans are called a Streamline Installment Agreement.
Normally, applying for an IRS payment plan is literally like applying for a home mortgage loan, and requires extensive prying into your personal finances. Historically, the IRS will simplify this procedure if you owe less than $25,000 and can make large enough payments to pay off the tax debt within 5 years (60 months).
The IRS has issued new regulations regarding Streamline Installment Agreements, due to the continued economic difficulties and the fact that their collections case burden is skyrocketing and they don’t have the personnel to manage so many tax debts.
Now, the IRS will accept a Streamline Installment Agreement for taxpayers that owe up to $50,000. In addition, they will give you up to 6 years to pay it all off. This effectively makes the vast majority of tax debtors eligible for the program, allowing the IRS to expend resources chasing after people that owe much larger sums of money, and lessening the headache and aggravation they cause to middle class families that have enough to worry about without the threat of the IRS seizing funds in bank accounts or garnishing wages.
Setting up an Installment Agreement under these criteria can be done over the phone or on the IRS web site. Of course, you may wish to consult with a licensed tax professional to determine if another option, such as Status 53 or an Offer in Compromise, may be better for you financially. Oftentimes, individuals and small businesses that qualify for a Streamline Installment Agreement with a small payment amount may also be eligible for these other programs. Status 53, also called “Currently Not Collectible” status, doesn’t require you to make any payments, but does require full financial disclosure. An Offer in Compromise also requires full financial information from you, but allows you to settle your entire tax liability for some fixed amount that is less than what you actually owe.
As with most things in life, make sure that you explore all your options, and that you thoroughly understand both your rights and your obligations under any tax resolution program you enter into. Seeking advice from a qualified professional, even if you are going to negotiate a resolution on your own, is always suggested.