If you owe the Internal Revenue Service money due to back taxes, then you could qualify for an installment agreement. “What is an installment agreement?,” you may ask. Well, simply put, it is a deal that you strike with the IRS with specific stipulations that allow you to pay back your debt to the agency. In exchange the IRS will offer you protection from a tax lien.
Two of the most common options for installment agreements are the Guaranteed Installment Agreement and the Streamlined Installment agreement. The former requires the individual to have less than $10,000 in tax debt and they also must have clean tax records for the last five years. You also must be incapable of paying back the debt by the due date to qualify for a Guaranteed Installment Agreement, and you must pay back your debt in full within three years.
For the Streamlined Installment Agreement, the individual must owe less than $25,000 in total tax liability (including interest and penalties) and it must be paid off within 60 months.
You can utilize different payment options when you are under an installment agreement, such as deducting directly from your paycheck, using a credit card, or using a number of online payment system.
Two other reminders about these installment agreements:
- You will still accumulate fees, penalties and interest on your debt every year while the agreement is in place. So it is best to pay your debt off quickly under the agreement.
- The IRS could revoke the deal if you break the rules stated in the agreement.
Source: FindLaw, “The IRS Installment Agreement,” Accessed Nov. 17, 2015