All types of IRS installment agreements have some things in common:
- You can’t afford to pay your full balance now, but you can afford to make monthly payments.
- You can avoid enforced collection actions, such as bank levies or wage garnishments, if you make your monthly payments and stay in tax compliance.
- Penalties and interest continue to accrue until your full balance is paid.
In addition, installment agreements typically required you to pay your full balance over time (except for partial payment plans).
When choosing an installment agreement, consider the requirements and benefits of each of the following types of payment plans.
Short-Term Payment Plans
These plans require you to pay your full balance within 120 days. That may require you to make large monthly payments, depending on how much you owe.
The main benefits of short-term payment plans are that there are no setup fees and you minimize penalties and interest by paying your full balance off within four months.
Streamlined Installment Agreements
You may request a streamlined installment agreement (SIA) if you owe less than $50,000 ($25,000 for businesses). You’ll need to pay the full amount within 72 months or by the collection statute expiration date (CSED), whichever comes first. You’ll also need to make payments by direct debit or payroll deduction if you owe over $25,000.
The benefits of an SIA are that you don’t need to complete a collection information statement or have the IRS determine whether a Notice of Federal Tax Lien should be filed.
Guaranteed Installment Agreements
You can use a guaranteed installment agreement (GIA) if you owe $10,000 or less and can pay off your full balance within 36 months. GIAs offer the same benefits as SIAs, but they also offer guaranteed acceptance if you meet the requirements.
Direct Debit Installment Agreements
Direct debit installment agreements (DDIA) require payment by automatic withdrawal from your checking account. Some other types of installment agreements, such as SIAs, may require payment by direct debit.
DDIAs have lower setup fees and you can request a withdrawal of a Notice of Federal Tax Lien in some cases. You can don’t have to remember to make a payment every month.
Partial Payment Installment Agreements
Partial payment installment agreements (PPIAs) let you pay less than your full balance over time. These are a great option if you have some ability to pay but can’t qualify for an Offer in Compromise.
You’ll need to provide detailed financial information, and the IRS may ask you to sell or borrow against your assets before accepting a PPIA.
Consult a tax resolution attorney for help selecting the IRS installment agreement option that fits your budget.
The Gartzman Law Firm offers delinquent tax return preparation, audit defense, and tax settlement help for both federal and state tax debt. Use our contact form to request a consultation with an Atlanta tax resolution attorney.