Streamlined Installment Agreement - Process & Guidelines

A Streamlined Installment Agreement (IA) is best for those taxpayers who owe the IRS up to $50,000 and who do not sufficient capital in other places to satisfy their tax debt all at once. The reason why it is coined "streamlined," is because the IRS will typically provide you with this type of IA without requiring a financial statement (form 433f - Collection Information Statement) provided that you meet the qualifications and follow the process below. If you owe over $25k but less than $50k, the IRS may require you fill out a form 433f but generally won't consider it in regards to your monthly payment.

Some Streamlined Installment Agreement Requirements

1. Less Than $50k in back taxes or tax debt (including assessed penalties and interest)*
2. The taxes owed are not more than 5 years old and you have filed tax returns
3. You don't have any other IAs currently with the IRS
4. You are not in bankruptcy (or filed for it) or had an Offer In Compromise Accepted
5. You can and agree to make monthly payments towards your tax debt genearlly over 5 years (Less than $25k) or 6-7 years (if between $25k-$50k) or less (24 months for businesses) or generally by the Collection Statute Expiration Date (CSED)*.
6. If you work for yourself, for the current year you are up to date with estimated payments

In some cases, if you cannot pay off your tax balance in 5 years, or you are interacting with a Revenue Officer, you may have to complete a Collection Information Statement (form 433-A as Revenue officers generally do not like form 433f).

Business Streamlined Installment Agreements

The new policy by the IRS (which will be reviewed in a year) makes it easier for businesses to obtain Streamlined Installment Agreements if they owe $25,000 or less, setup a direct debt streamlined Installment Agreement, and agree to pay if off in 2 years or 24 months. If they owe more than $25k they need to reduce their balance to $25k in order to qualify. Before, only businesses that had 10k or less in debt would qualify.

*Recent Changes with IRS Fresh Start Program

The IRS recently announced in February 2012, that individual taxpayers can now qualify for streamlined installment agreement with tax liabilities up to $50k (previously 25k) . Moreover, taxpayers on a streamlined installment can now pay back their tax liabilities over 6 years instead of 5 if the taxpayer agrees to make monthly installment agreements via direct debit (payments directly debited from your bank account).

Streamlined Installment Agreement Process

1) File all tax returns if you haven't (requirements above clearly state this)

2) Fill out Form 9465 or utilize the Online Payment Agreement Application (OPA) at the IRS.gov or have your professional (Power of Attorney) provide you assistance by completing the process for you. Make sure to read the details the IRS provides as well. It is recommended to use the OPA because typically you will know much faster whether your IA has been accepted. If you are filling out form 9465, section 5 is normally not needed, as it is not required if you owe less than $25,000.

3) Determine Monthly Payment: As a rule of thumb, take the total amount you owe, including interest and penalties, and divide that by 50, for 50 months. The reason this is calculated this way is because the remaining 10 months of the 5 year payment plan is set aside for interest .

4) Pay User Fees and First Month's Payment : a $52 User fee (for ACH withdrawal or debit) or the $105 (check or payroll deduction) with your first payment which will be due in about 45 days. The IRS recommends Direct Debit or a Payroll Deduction because data shows you are less likely to default or miss a payment. Furthermore, setting up the monthly payment direct debt can lead to a tax lien being withdrawn (after successful payment history period). This fee can be reduced if you are under the Department of Health & Human Services poverty level.

5) Date, Sign and Send Away - If you are not using the Online Payment Agreement Application, then make sure to make copies of Form 9465 you complete, and send original hard copies to the appropriate IRS address which is listed on the 2nd page of Form 9465.

Typically, you will get a response within 30 days or less and a confirmation letter with the payment terms. If the IA is rejected, the IRS will not make collection efforts on your property for at least 30 days. As noted on other pages, although the IRS will not increase collection efforts during the time you wait for an IA decision or acceptance, the IRS can, at any time during the payment plan's life, impose a tax lien on your property until your last monthly payment is paid.

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