Non-Streamline Installment Agreements
If you owe income tax, civil penalties, or payroll taxes, you can apply for an installment agreement to make monthly payments on your tax debt. If you owe over $50,000 in assessed taxes, you will need to apply for a non-streamlined installment agreement. Here is an overview of this type of payment plan.
What Is a Non-Streamlined Installment Agreement?
This is a monthly payment plan for people who owe over $50,000 in assessed taxes but less than $250,000. You can make payments until the collection statute expiration date (CSED) which is 10 years from the date of assessment.
The IRS will file a notice of federal tax lien against you in most cases. In most cases, you don't have to file a collection information statement unless the taxpayer needs a tax levy released or their debt is certified as seriously delinquent. You also have to be compliant with the last six years of filing requirements. Keep reading for more details.
Notice of Federal Tax Lien
When you set up a non-streamline agreement, the IRS will file a notice of federal tax lien against you. If you want to avoid this, consider making a large payment to get your assessed balance under $50,000. Then, apply for a streamlined installment agreement.
Note that there was an exception for 2019 taxes. Thanks to relief legislation passed during COVID, the IRS generally doesn't file tax liens for 2019 tax debts under $250,000.
Collection Information Statement
Generally, you don't have to file a collection information statement (CIS) with all non-streamline agreements. A CIS is a financial disclosure that includes details about your income, expenses, assets, and liabilities. As long as you owe under $250,000, you don't have to submit financial details although there are exceptions.
However, there are a couple of exceptions to this rule as follows.
- Assignment to revenue officer — If a revenue officer has been assigned to your account, they may require a CIS on balances under $250,000. It's at their discretion.
- Prior history of default — You may need to provide a CIS if you have defaulted on an installment agreement in the past.
- To remove a tax levy — If the IRS is levying your bank account, wages, or other assets, you will need to file a CIS to request this payment plan and get the levy removed.
- Seriously delinquent tax debt — If the IRS has certified your tax debt as seriously delinquent and asked the State Department to revoke your passport, you will need to file a CIS to set up this payment plan and get past the certification.
The easiest payment option is to set up a direct debit. When you do this, your agreement becomes a direct debit installment agreement. You can also opt for a payroll deduction which means that your employer withholds the funds and sends them to the IRS. Payroll deductions are rare.
Alternatively, you can send in money orders or checks every month to make your payment. You can also sign into the EFTPS to make payments.
Filing Compliance Requirements
To set up a non-streamlined payment plan, you must meet the same requirements as any other payment plan. In particular, you must have filed the last six years of tax returns. If your system is in the automated collection system (ACS), the requirements get updated on January 1, but if a revenue officer is assigned to your case, the year doesn't get updated until April 15.
For example, say that you're applying for a non-streamline agreement on February 1, 2024. If you're dealing with the ACS, you need to have filed 2023 as well as the preceding five years (2018, 2019, 2020, 2021, 2022). You can either request an extension or file early to meet the 2023 requirement.
However, if a revenue officer has been assigned to your case, they won't start the new year until April 15. If you're applying on February 1, 2024, you must have filed 2017 through 2022 to meet the filing compliance requirement.
Note that if the IRS has issued a substitute for return (SFR) for any of the years you didn't file, that meets your compliance requirement. However, you may want to refile the SFR if the information is incorrect. That said, if you're applying for an offer in compromise, you don't necessarily have to worry about correcting a too-high liability — ultimately, it depends on the numbers.
How to Set Up Non-Streamlined Agreements
To apply for a non-streamlined agreement, you can mail Form 9465 (Instalment Agreement Request) to the IRS. However, this can be very time confusing. To save time, fill out this form, and then, call the IRS to give them the information over the phone.
If you don't want to sit on hold and if you want to ensure that you're making the best decisions possible about your tax debt, you should contact a tax professional. They can handle this process for you.
Non-streamlined installment agreements require managerial approval. Even if your account is still in the automated system, a human manager will review this request. Luckily, as long as you meet the criteria, you will likely get approved. To review, that includes the following:
- Ability to pay off the tax debt by the collection statute expiration date.
- Filing compliance for the last six years.
- Provided a collection information statement if required.
Once you're approved, start making payments as scheduled. To be on the safe side, you may want to make monthly payments while the IRS is reviewing your application.
What If the IRS Denies Your Application
If the IRS denies your payment plan application, you should reach out and find out why. If there's a small issue that prevented approval, address it and apply again. For instance, if the IRS denies you because you didn't file a tax return five years ago, contact a tax pro that helps with filing back taxes and then, knock out that requirement.
You can also appeal the denial. Then, you will need to explain why the IRS should have accepted your payment plan. If relevant, you can present new information at this time.
Otherwise, look at other strategies to pay off your tax debt. For instance, you may want to borrow against the assets in your equity so that you can pay in full.
What to Expect While on a Non-Streamlined Agreement
While you're making payments, the IRS expects you to stay compliant with all new filing and payment requirements. Make a plan to ensure that you file all of your personal and business tax returns on time. Also, budget to ensure that you can pay these bills.
The number one reason people default on payment plans is because they file a return with a balance that they cannot afford to pay. Typically, the IRS will not roll these balances into your existing payment plan, but in some cases, you may be able to talk them into it.
The IRS will also put your payment plan into default if you miss a monthly payment. Luckily, the agency won't do this right away. Instead, if you miss a payment, they will encourage you to catch up. If you refuse to pay after a demand for payment, then, they will rescind your agreement.
Alternatives to a Non-Streamlined Agreement
This is just one of the agreements that the IRS offers. Here are the other options:
- Guaranteed installment agreement — This is for taxpayers who owe less than $10,000 in assessed taxes and can pay off the balance in three years.
- Streamline installment agreement — For taxpayers who owe $50,000 or less in assessed taxes, gives you up to 84 months to pay, and doesn't require a tax lien to be filed.
- Partial payment installment agreement — For taxpayers who cannot afford to make the minimum payments on a traditonal type of payment plan. It requires a financial statement. You make the largest payments you can afford, and the IRS waives the remaining balance when the collection statute expiration date (CSED) passes.
When looking at payment plans, you may also see the following phrases. These are not their own type of payment plans. Rather, they refer to requirements that can come into play with the plans noted above.
- Direct debit installment agreement — You agree to let the IRS take your payments directly out of your bank account.
- Financially verified installment agreement — You provide the IRS with a collection information statement when you apply for a payment plan.
When you contact a tax pro, they will help you find the best option for your situation. They'll also explain the different implications of various options.
Note of Caution
Regardless of how much you owe to the IRS, don't assume that a monthly payment plan is the best option. According to independent research from the Taxpayer Advocate Service (an independent division of the IRS, devoted to representing the interest of taxpayers), over 25% of people who set up payment plans could have qualified for an offer in compromise or a partial payment installment agreement.
Although PPIAs and OICs work a bit differently, they both let you settle your taxes for less than you owe. With a payment plan, in contrast, you may the IRS every cent that you owe.
The majority of people don't qualify for PPIAs and OICS. If you can comfortably pay your tax bill, you likely won't qualify. However, as indicated above, people are paying more than they have to. If you can qualify for a settlement, you should take that route and save money. To protect your finances, you may want to consult with a tax professional.
Get Help Today
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