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 within 72 months or by the CSED if that comes sooner.
You can set up a streamlined installment agreement on income taxes, civil penalties, payroll taxes for your business, and other assessments such as the Trust Fund Recovery Penalty. Note that if your business is still in operation, you can only get a streamlined agreement on up to $25,000 in income tax, and you generally must pay off the balance within 24 months.
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 to get your account marked as currently not collectible.
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. Note that these thresholds apply to assessed taxes, and they don't include interest or penalties.
SIAs and Tax Liens
With recent IRS expanded criteria, 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, if you have a history of default, the IRS may make a lien determination even if you meet these conditions.
If the IRS has already issued a tax lien against you, you may be able to get it withdrawn. Individuals who owe $50,000 or less and set up a direct debit SIA or payroll deduction SIA, can have tax liens withdrawn.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.
Recent IRS Changes
Usually, with balances under $50k, individuals can obtain up to 72-month terms. However, if the collection statute expiration date is within the next six years, you can only take that long to pay. The shorter deadline applies. Generally, active businesses with balances of $25,000 or less can obtain 24-month SIAs. Similarly, non-operating 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).
In late 2016, the IRS began testing new criteria for individuals with more than $50k in taxes. Specifically, the IRS allowed individuals with balances between $50,000 to $100,000 to set up 84-month SIA terms as long as the tax is paid before the CSEDs and the payment method was direct debit or payroll deduction. However, the IRS did not extend this program. Instead, the agency replaced it with a non-streamlined installment agreement.
A non-streamlined agreement allows taxpayers to have balances up to $250,000. As long as your account hasn't been assigned to a revenue officer, these plans do not require financial disclosure or automatic payments, but they generally include a lien determination. Moreover, the balance due only needs to be paid before the CSED. That means that you could have up to 120 months to pay certain balances. However, if a revenue agent has been assigned to your account, they may require a financial disclosure (collection information statement).
To set up a non-streamlined installment agreement on over $250,000, you will need to provide a collection information statement.
Requirements for a Streamlined Installment Agreement
Individual taxpayer streamlined installment agreement requirements include the following:
- $50,000 or less is owed, not including interest and penalties for individuals.
- If you owe $50,000 or less in assessed tax, you are willing to make payments for up to 72 months or before the CSED(s) expires.
- You have filed at least the last six years of tax returns or the last five years and an extension for the current year. If you have delinquent returns, you must file the tax returns before you can qualify for an installment agreement. If the IRS has issued a substitute for return, that covers your filing requirement.
- 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. There is a $31 fee if you set up a direct debit from your bank account using the OPA. It is $130 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. To ensure you pay off the interest and penalties, you may want to divide your balance due by a slightly lower number to give yourself a cushion.
- 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 if you want to avoid 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. Generally, if you miss one or even two payments, the IRS won't terminate your agreement. The agency will try to work with you, but if you continue to miss payments, the plan will go into default. 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 non-streamlined agreement or a verified financial 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.