Installment Agreements: Which one is right for you?

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In my Middleburg, FL practice I find that a lot of people who owe the IRS are eligible for installment agreements. Installment agreements allow you to pay the IRS over time rather than all at once. The IRS will continue to charge interest and penalties, of course, so it is always better to exhaust your other options for getting the money first. If there are no other options, installment agreements can be a great way to make a large debt manageable and get the IRS off your back. There are four types of installment agreements available to choose from:

1.       Automatic: This option is available if you owe the IRS less than $10,000, you have not owed any tax or had an installment agreement in the last five years, and you agree to pay the full amount owed within three years. This option is great because it is easy to apply for online or via Form 9465 with your tax return and you do not have to provide the IRS with any financial information.

2.       Streamlined: This option is available if you owe the IRS less than $50,000, you have not had a tax debt or an installment agreement in the last five years, and you agree to pay the liability in full within 72 months in equal monthly payments. It is also easy to apply for online and you do not have to provide any financial information.

3.       Regular: If you don’t meet the requirements of either option above, you will be required to fill out a Collection Information Statement (IRS Form 433). This will document all your monthly income and expenses to determine how much you can pay the IRS per month. The big kicker with this is that the IRS has amounts they consider allowable for certain expenses and this amount is rarely what you are paying. For instance, you might spend $1,000 on groceries every month but the IRS allowable amount for your family of 3 is only $742. That means they’re going to expect you to give them that $258 per month instead of the grocery store.

4.       Partial-Pay: This is just like the Regular installment agreement in #3 with one exception. If your Collection Information Statement shows that you cannot pay what you owe in full before the Statute of Limitations runs out, even using the IRS allowable expense amounts, then they may agree to let you pay the maximum that you can pay for the remaining time allowed.

If you would like to work with a professional who will take the time to evaluate your unique situation to see which installment agreement is the best option or have any other tax questions, please contact my Middleburg office at 904-600-3450.

Angela Yonge
Enrolled Agent
Acorn Bookkeeping & Tax, LLC
904-600-3450
Location: Middleburg, FL 32068, USA

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