An Income-Based Way to Retire Your Large Tax Debt
In the closing minutes of Steven Spielberg’s Saving Private Ryan, a small group of American troops fell back to “the Alamo” for their last stand against an overwhelming German onslaught. Mostly due to the sacrifices of men like these, our personal liberties are guaranteed. However, our personal finances are another matter altogether. Sometimes, it feels like the IRS is closing in for the kill. If there seems to be nowhere else to go, an IRS non-streamlined installment agreement could be your Alamo.
These pacts are normally the only option for people who owe over $100,000 in back income taxes and either do not qualify for, or do not want to pursue, an offer in compromise. It’s not easy to defend the Alamo. Only the last-minute appearance of a P-51 squadron saved the Merederet River bridge in tiny Ramelle. Similarly, it is not easy to obtain an IRS non-streamlined installment agreement. However, it’s not impossible to get one either.
For the most part, anything with “non” in the title is either really good (nonstick) or really bad (non-working). Again for the most part, IRS non-streamlined installment agreements are in the latter (really bad) category.
The $100,000 threshold may be subject to change. Unless the IRS renews the expanded streamlined installment agreement threshold in September 2018, the limit will go back to $50,000. People who owe large amounts of back taxes will have even fewer options then. So, if you are thinking about an installment agreement and you are in this boat, think hard and fast. Some other requirements include:
- Not in bankruptcy,
- All prior returns on file,
- Promise for future tax compliance, and
- No prior installment agreements in the past five years.
All IRS non-streamlined installment applicants must also return Form 433-F. The Service uses the income and expense information it contains to calculate a monthly cash flow amount. Typically, an IRS supervisor will not approve the application unless the proposed monthly payment matches the monthly cash flow.
The IRS sometimes, but not always, requires taxpayers to sell assets and pay down their debts before it approves their proposals.
Advantages of an IRS Non-Streamlined Installment Agreement
Even though this vehicle is a last gasp in many cases, there are still some definite advantages.
These pacts are entirely income-based. Delinquent taxpayers remit as much as they can until the 10-year collection statute of limitations expires. Then, the IRS writes off the remaining amount. Along that line, IRS non-streamlined installment agreements can last much longer than the other forms of installment agreements. That gives people more time to pay.
Furthermore, there is no financial review, unlike in partial payment installment agreements. So, non-streamlined agreements effectively combine the ease of a payment plan with the finality of an offer in compromise.
Talk to an IRS tax lawyer today to discover the best way to pay off your tax debt.