IRS Streamlined Installment Agreement
If you owe $50,000 or less or if your business owes $25,000 or less, you may qualify for a Streamlined Installment Agreement (SIA). The IRS calls these installment agreements “streamlined” because they don’t require verification of your assets, expenses, liabilities, or income. In other words, no Collection Information Statement is required in most cases as long as you can pay off the balance before the CSED expires. This includes income taxes and other assessments such as the Trust Fund Recovery Penalty.
These payment plans usually carry 72-month terms. However, they never extend beyond the Collection Statute Expiration Date CSED. That is the date your tax expires, or the IRS can’t collect on it anymore.
If you cannot make the minimum monthly payment on a Streamlined Agreement, consider an Offer In Compromise or a Partial Payment Installment Agreement. Alternatively, try to prove financial hardship to the IRS.
Streamlined Installment Agreements and the Fresh Start Initiative
In 2011, the IRS’s Fresh Start Initiative changed the eligibility levels for the Streamlined Installment Agreement. Before the change, businesses needed to have less than $10,000 in taxes, and individuals were required to have less than $25,000. Now, however, individuals can qualify with up to $50,000 in assessed taxes (with exceptions), and businesses can be eligible with an income tax balance of up to $25,000.
SIAs and Tax Liens
Individuals who owe $25,000 or less and set up a direct debit SIA or payroll deduction SIA, can have tax liens withdrawn. Before the IRS removes a tax lien, the taxpayer must make three consecutive monthly payments. With recent IRS expanded criteria due to Covid-19, a tax lien is generally only placed if the tax balance is $50,000 or more, or if the balance is between $25,000 and $50,000, and–the taxpayer refuses to use direct debit or payroll deduction as a payment method. However, a lien determination can be made even if the taxpayer meets these conditions.
Recent IRS Changes
Usually, with balances under $50k, individuals can obtain up to 72-month terms. In late 2016, the IRS began testing new criteria for individuals with more than $50k in taxes. Specifically, individuals with balances between $50,000 to $100,000 used to be able to take advantage of 84-month SIA terms as long as the tax is paid before the CSEDs and the payment method is direct debit or payroll deduction. However, the IRS has not extended this and instead replaced it with a non-streamlined installment agreement. This agreement allows taxpayers to have balances up to $250,000, does not require financial disclosure or automatic payments but does generally include a lien determination. Moreover, the IRS may allow taxpayers up to 120 months to pay the balance or before the CSEDs expire. In some cases, the IRS may require the taxpayer to extend the statute.
Generally, active businesses with balances of $25,000 or less can obtain 24-month SIAs. Similarly, companies can qualify for streamlined trust-fund (payroll tax) repayment plans, as long as they pay off the balance within 24 months or by the CSED (whichever comes first).
Requirements for a Streamlined Installment Agreement
Individual taxpayer streamlined installment agreement requirements:
- $50,000 or less is owed, including interest and penalties for individuals.
- If you owe $50,000 or less, you are willing to make payments up to 72 months or before the CSED(s) expire. If you owe more than $50,000, you are willing to pay off the balance before the CSED. In the event CSEDs cut short the repayment period, you may be able to extend the repayment time by signing a waiver.
- You have filed at least the last six years of tax returns. If you have delinquent returns, you must file the tax returns before you can qualify for an installment agreement.
- Your spouse and you (if married filing jointly) have not entered any installment agreements over the last five years.
- You are not filing for bankruptcy.
- You are willing to pay a fee to set up a Streamlined Installment Agreement. These fees are rolled into your first payment, so remember to budget for them. There is a $31 fee if you set up a direct debit from your bank account using the OPA. However, the OPA can only support taxpayers with a combined balance (including interest and penalties) of $50,000 or less. It is $149 if you set up an agreement with the OPA but pay by check or money order. However, the former fees jump to $107 and $225, respectively, if you do not use the OPA. There is an $89 fee to reinstate the payment plan or restructure an installment agreement. If you use the OPA, that fee is $10.
How to File or Request a Streamlined IRS Installment Agreement
- Contact the IRS to make sure you don’t have any missing tax returns. If you do, make sure to file the tax returns first and get into compliance. See our unfiled tax returns page to get started.
- If you are a business that owes $25k or less, or an individual who owes $50k or less, you can use the IRS Online Payment Agreement (OPA), call the IRS, or mail-in form 9465.
- When applying, you need to ensure your monthly payment satisfies the taxes within the CSED(s). Remember, the faster you pay off the taxes, the more you save in interest and penalties.
- You can estimate your payment by dividing the total amount you owe by 72 (or # of months left on CSED) if you owe $50,000 or less.
- Choose a payment date. It must be between the 1st and the 28th, but pick a day that works with your budget. Paying late can terminate the agreement.
- Select your payment method. Under new IRS criteria, tax amounts between $25,000 to 50,000 require direct debit or a payroll deduction and generally do not lead to a lien.
- If you want the IRS to withdraw the payments directly from your paycheck, use Form 2159 (Payroll Deduction Agreement). You pay the setup fee along with your first payment.
- If you run into issues or prefer a better outcome, contact a licensed tax professional to help you with the forms and the process. Remember, mistakes can lead to more interest and penalties.
- Generally, the IRS provides a decision within 30 days. To be on the safe side, make the payments until you get a response. Also, feel free to contact the IRS directly. Calling the IRS can speed up the setup process, but unfortunately, sometimes, hold times are long.
Contact the IRS or a tax professional if, at any point, you cannot make monthly payments anymore. Missed payments could lead to a termination of your agreement. If the IRS terminates your agreement, it can start the asset seizure process.
Most importantly, if you do not qualify for a streamlined installment agreement, you may be eligible for a verified financial installment agreement or an installment agreement that requires you to disclose your financial information to the IRS.
Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional.