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Streamlined Installment Agreements: The Pros and Cons

More Taxpayers Now Qualify Under the Temporarily Expanded Program

IRS Streamlined Installment AgreementIRS agents are determined to take your money. At least they are also determined to make it fairly easy to pay. You just have to know the right places to look, and in many cases, an IRS streamlined installment agreement may be just the ticket.

Three times since 2012, the government has significantly expanded this program. But all good things must come to an end. When the sun sets on the current expansion in September 2018, that may be the end of this particular good thing. My mother always said that you should strike while the iron is hot. She usually gave pretty good advice, and her suggestion may be relevant here.

The Good

IRS streamlined installment agreements are so named because agents can process them straightaway without supervisor approval. That saves time. Moreover, if the taxpayer owes less than $50,000, the IRS does not require a financial statement. That saves time and also preserves your privacy.

Another good thing is that the monetary cutoffs have changed significantly. The 2012 Fresh Start initiative doubled the threshold from $25,000 in back taxes to $50,000. Four years later, the IRS streamlined installment agreement threshold doubled again, to $100,000. Unless the Service renews the extension, taxpayers with balances above $50,000 will no longer be eligible for IRS streamlined installment agreements after September 2018.

The specific rules differ at each amount and they are a little complex. If the taxpayer owes $50,000 or less:

  • Payment Term: All taxes, penalties, and interest must be paid within seventy-two months or before the collection statute of limitation expires, whichever is sooner.
  • Financial Statement: An IRS streamlined installment agreement never requires Form 433-A or Form 433-B. However, if the balance is between $25,001 and $50,000, taxpayers who defaulted on a prior agreement must verify their ability to pay.
  • Payment Method: The IRS prefers direct debit but does not require it unless the balance due is between $25,001 and $50,000.
  • Lien Notice: The IRS will not file a notice if the balance is less than $25,000. That limit goes up to $50,000 if the taxpayer pays through direct debit or payroll deduction.

In some cases, the government will lift a prior lien after three on-time payments on an IRS streamlined installment agreement.

Taxpayers who owe between $50,001 and $100,000 have eighty-four months to pay, assuming the statute of limitations doesn’t expire before then. These amounts always involve federal tax liens and sometimes involve Collection Information Statements. If the taxpayer agrees to direct debit, the IRS waives the CIS.

Other qualifications apply as well. For example, the taxpayer cannot be in bankruptcy and must remain compliant on future tax returns and payments.

The Bad and The Ugly

IRS streamlined installment agreements suffer from the same deficiencies as the other IRM 5.14 installment agreements. The payments are not tax deductible. Furthermore, penalties and interest keep adding up until the balance is paid. So, taking out another loan and paying the balance at once can save many taxpayers a lot of money. That’s especially true if the loan has tax deductible interest.

Before making a decision, it’s very important to know all the pros and cons of an IRS streamlined installment agreement.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.