How Long Are IRS Installment Agreements?

The length of an IRS installment agreement (IA) depends on the type of installment agreement you obtain. There are several different types of IAs as discussed further below. The amount and type of tax you owe and how quickly you can pay determines which IA may be right for you. However, it’s important to carefully review the requirements and conditions for an IRS installment agreement so you make a well-informed decision about whether to pursue an IA or another option for resolving your tax debt. A tax lawyer can provide experienced guidance on these issues.

When Can You Obtain an Installment Agreement?

Taxpayers who cannot pay all their taxes at one time can request an IA. Approval may be relatively easy if you don’t owe much and can pay the debt relatively quickly. However, the more you owe and the longer time you need to repay, the harder it is to obtain an IA with the terms you may want.

Notably, if you are approved for an IA, you must make payments on time as well as pay your future taxes in full or you risk default and collection action.

How Much Time Do You Have to Pay Off an IRS Installment Agreement?

The time you have to pay off an IRS installment agreement varies according to the type of installment agreement.

Taxpayers who owe less than $10,000 (not including interest and penalties) and can pay within three years and before the statute of limitations expires may qualify for a guaranteed IA.

Streamlined IAs may be available to taxpayers who owe $50,000 or less (not including penalties and interest) and can pay in full within 72 months and before the statute of limitations expires.

Individual taxpayers who owe $250,000 or less and can pay in full within the remaining statute of limitations may qualify for a non-streamlined IA. Note that this option does not apply to business taxpayers.

Instead, business taxpayers may be eligible for an in-business trust fund express IA. Businesses must have current employees, owe $25,000 or less, and pay in full within 24 months.

Taxpayers that do not fall under one of the previous categories may apply for a routine IA but must pay the debt within the statute of limitations.

Finally, partial payment IAs allow financially qualified taxpayers to pay less than the full amount owed. Monthly payments are made until the statute of limitations expires. However, even if the IA is granted, the IRS will review it and may change it every two years.

Note that there are other requirements for each of these so it is advisable to consult a tax attorney to determine whether you qualify and explain the ramifications of signing an agreement with the IRS.

Will the IRS Review Your Finances Before Approving an Installment Agreement?

The IRS does not require a financial statement to qualify for guaranteed and streamlined IAs. However, financial information is required for partial pay IAs to qualify initially and when it is reviewed every two years. It may be needed for other IAs.

Should You Apply for an Installment Agreement?

IAs are a good way to address your tax problems. However, interest and penalties will continue to accrue while you are paying off the debt. As a result, you should consider whether you can get a loan if your loan interest rate is less than what you would be charged in interest and penalties by the IRS. You should also talk to a tax attorney about whether you may qualify for an offer-in-compromise or other option for resolving your tax liability.

If you owe back taxes, contact us for a consultation.