Tax debts could be a real cause of worry when you default on your tax payments. Escaping the clutches of the IRS is not quite easy. Now if you are wondering how to deal with your mounting tax debts amidst your crippling finances, then an installment agreement would solve your problem.
An installment agreement is by far the best and easiest way to deal with your tax debts. All it includes is a monthly repayment plan that helps you to pay off your taxes owed to the IRS quite comfortably.
Installment agreement offers you 4 options for tax debt relief that are tailored to suit your individual situation and need:
1.GUARANTEED INSTALLMENT AGREEMENT
Under this installment plan the IRS is required to agree to an installment plan if you owe a tax debt of $10,000 or less.
Tax liens damage your credit score significantly and negatively impact your credibility as a debtor. The chief advantage of Guaranteed Installment Agreement is that under this program the IRS will not file a federal tax lien against you and also the IRS will not ask you to fill out a financial statement (Form 433-F) for analyzing your current financial situation. However, in case of Guaranteed Agreements, you must file all your tax returns on time and pay your taxes on time in the future.
Overall, Guaranteed Installment is quite a safe option for consumers willing to protect their ability to procure credit.
2.STREAMLINED INSTALLMENT AGREEMENT
If your tax due is $25,000 or less, then you can consider a Streamlined Installment Agreement. The IRS will consent to a repayment plan under this scheme provided you agree to pay off the balance within 5 years.
If your balance expires within this 5 year-period due to the 10-year Statute of Limitations on collections, then the IRS will require full payment within rest of the Statute of Limitations. The minimum payment you must make to the IRS is the total of your outstanding balance (interest and penalties included) divided by 50.
Streamlined Installment too like Guaranteed Installment, does not require a federal tax lien. It also exempts you from filling out a financial statement (Form 433-F).
3.PARTIAL PAYMENT INSTALLMENT AGREEMENT
If the payment schemes for both guaranteed and streamlined installments seem far beyond your budget, then a Partial Payment Installment Agreement would be the right thing for you. This scheme allows you to have a repayment plan based on what you can afford every month after putting aside your living expenses.
A partial payment installment plan comes with a mix of advantages and disadvantages. On one hand, it covers a longer repayment term. On the other hand, the IRS may file a federal tax lien to protect its interests in collecting the debts under this plan.
You will also be required to fill out a financial statement (Form 433-F) to report your average income and living expenses for the past three months, along with other required documents. Moreover under this, the IRS evaluates the terms of the installment agreements every two years to check if you are able to pay more.
4. NON-STREAMLINED INSTALLMENT AGREEMENT
If your owed tax debt is over $25,000 or if you need a repayment term longer than 5 years, or if you do not meet the requirements for the a guaranteed or streamlined plan, then you can go for a Non-Streamlined Installment Agreement plan. Under this, you will negotiate the agreement directly with an IRS agent. Thereafter, the agreement will be sent to the IRS for assessment and approval.
It is known as Non-Streamlined Agreement, as it does not come within the IRS guidelines for automatic approval of agreements. This plan too like the Partial Payment plan will require you to submit your financial statement to the IRS, so that it can review your financial situation and assess how much you can afford towards your monthly payment of tax.
Also the IRS might suggest you to sell off some of your assets or get a HELOC so that you can easily pay off your owed balance easily. Besides that, the IRS is also likely to file a federal tax lien under this agreement.
Although Installment Agreements offer you the best options for tax payment, there are also several other tax payment plans, you might want to know about. Therefore, it is always advisable that you seek advice of a reputed licensed tax debt attorney, whenever you set out to manage your tax issues. Since, a tax lawyer knows the right tricks to deal with the IRS, he is the best person to recommend the best payment option suitable for you. Besides, the lawyer will also help you determine your consumer rights and effectively pull you out of your debt problems.