[{"@context":"https:\/\/schema.org\/","@type":"Article","@id":"https:\/\/moneydoneright.com\/taxes\/tax-relief\/what-is-an-installment-agreement\/#Article","mainEntityOfPage":"https:\/\/moneydoneright.com\/taxes\/tax-relief\/what-is-an-installment-agreement\/","headline":"What Is an Installment Agreement?  A CPA Explains","name":"What Is an Installment Agreement?  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https:\/\/choicetaxrelief.com\/free-tax-relief-consultation\/\n\nTax relief is a general term used to describe various programs that taxpayers and their representatives \u2014 such as enrolled agents, CPAs, and tax attorneys \u2014 utilize to minimize or even eliminate the taxes, penalties, and interest a taxpayer owes to the IRS and other tax agencies.\n\nThese tax relief programs range from a simple phone call to the government for first-time penalty abatement to a full-fledged offer in compromise.\n\nIn this video, Logan Allec CPA answers the question, \"What Is Tax Relief?\" and goes over the three major IRS tax relief programs we use everyday for our clients.\n\nVideos Mentioned In This Video:\n\u27a1\ufe0f Offer In Compromise Basics: https:\/\/youtu.be\/tR3uaqJE86o\n\u27a1\ufe0f Offer In Compromise Formula: https:\/\/youtu.be\/1jDj6yHnjMI\n\u27a1\ufe0f Filing Back Taxes: https:\/\/youtu.be\/l4nj4ceBz_o\n\nTable of Contents:\n0:00 What Is Tax Relief?\n2:12 Tax Relief Program Commonalities\n3:10 The Three Major Tax Relief Strategies\n7:03 An Offer in Compromise May Not Be the Best Option\n8:10 Shady Tax Relief Companies\n9:00 Tax Relief Program #1: Offer in Compromise (OIC)\n11:12 State Offer in Compromise Programs\n14:05 Tax Relief Program #2: Currently Not Collectible (CNC) Status\n20:36 Tax Relief Program #3: Partial-Pay Installment Agreement 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I tell you how to file your back taxes step-by-step, how many years back you can (and possibly should) file your back taxes, and more!\n\nThere are many consequences to not filing your tax return, and it's generally in your best interest to file your back taxes as soon as possible.  You should also be aware of the interest and penalties that accrue on back taxes because they can be significant, especially the penalties.  Thankfully, in this video, I cover how the penalties are calculated and how you can possibly get rid of them.  And even if you don't owe taxes, you still want to file to secure your previous year's tax refund.  If you're wondering how many years back you can get a tax refund, I cover that too.\n\n\u27a1\ufe0f Email backtaxes@loganallec.com to get help with filing your back tax returns!\n\n\u2b07\ufe0f More Tax Relief Videos:\n- My Offer in Compromise Basics Video: https:\/\/youtu.be\/tR3uaqJE86o\n- My Offer in Compromise Formula Video: https:\/\/youtu.be\/1jDj6yHnjMI\n\n\u2b07\ufe0f Other Resources:\n- IRS Audit Technique Guides: https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/audit-techniques-guides-atgs\n- IRS Failure-to-File Penalty: https:\/\/www.irs.gov\/payments\/failure-to-file-penalty\n- IRS Policy Statement 5-133: https:\/\/www.irs.gov\/irm\/part1\/irm_01-002-001#idm139624982687680\n- IRS Transcripts: https:\/\/www.irs.gov\/individuals\/get-transcript\n- Bauer v. Commissioner: https:\/\/www.leagle.com\/decision\/intco20120604b95\n- Bizminer: https:\/\/www.bizminer.com\/\n- Bizstats: http:\/\/bizstats.com\/\n\nTable of Contents:\n0:00 How to File Your Back Taxes\n0:56 Why People Get Behind on Their Taxes\n2:08 The Snowball Effect on Back Taxes\n2:28 IRS Notices CP59, CP515, CP516, and CP518\n3:08 You Need to Deal With This\n4:10 Consequences of Not Filing Your Tax Returns\n4:29 IRS Failure-to-File Penalty\n5:13 IRS Failure-to-Pay Penalty\n6:10 Interest Accrual on Back Taxes\n6:49 Loss of Refund (How Many Years Back Can I Get a Tax Refund?)\n8:20 Inability to Get a Loan\n8:36 Inability to Get Student Aid\n8:43 Loss or Delay of Stimulus and Other Forms of Government Aid\n8:57 Loss of Immigration Status\n9:10 Loss of Future Social Security Benefits\n9:25 IRS Substitute for Return (BAD NEWS)\n12:04 Reasons Why You Don't Want the IRS to Prepare Your Return For You\n14:07 How Do You Actually File Back Taxes?\n14:29 How Many Years of Back Taxes Do You Have to File?\n15:13 Step 1: Figure Out What Returns You Need to File\n15:26 Step 2: Determine the Order in Which You Should Prepare Your Returns\n17:59 Step 3: Gather Tax Forms and IRS Transcripts\n19:25 Step 4: Reconstruct Your Information\n24:10 Step 5: Prepare and File Your Returns\n26:45 Penalty Abatement\n27:25 First-Time Penalty Relief\n28:02 Penalty Relief for Reasonable Cause\n\n#tax #taxes 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More\t\t\t\t\t\t\tBBB Accredited: A+ Rating With 5\/5 RatingGuarantee: 30-Day Moneyback GuaranteeReasonable Fees: Lower than Industry AveragesTax Attorneys and CPAs: Decades of Combined Experience\tTable of ContentsToggleInstallment Agreement Definition and ExampleTypes of Installment AgreementsPartial-Payment Installment AgreementsFull-Payment Installment AgreementsOption 1: Apply OnlineOption 2: Apply Over the PhoneOption 3: Apply Via MailOption 4: Apply in PersonOption 5: Hire a Tax Relief CompanyAlternatives to an Installment AgreementInstallment Agreement Frequently Asked QuestionsInstallment Agreement Definition and ExampleAn installment agreement is an arrangement that a taxpayer makes with the government to pay off their tax balance over a certain number of months.Acronym: IAFor example, let’s say a taxpayer owes the IRS $100,000.\u00a0 While the IRS could \u2014 if the taxpayer has the means to \u2014 demand that they liquidate assets and pay their tax debt immediately or else be subject to levy action, the taxpayer may persuade the IRS to accept a payment plan of, say, $1,400 per month over 72 months.Related: 6 Best Tax Relief CompaniesHow Does an Installment Agreement Work?If you are a resident or a citizen of the United States, you are subjected to its tax rules, which includes the payment of income tax.However, for various reasons, sometimes taxpayers do not pay the tax they owe immediately.This could, perhaps, be due to inability \u2014 yes, they earned some income that gave rise to their tax liability, but they had to spend all of that income on their daily needs \u2014 or unexpected emergencies \u2014 without setting aside the cash to pay the taxes on the income.It could also be due to unwillingness \u2014 the taxpayer could very well have paid the taxes they owed if they wanted to but they believed there were better uses for their money elsewhere.Whatever the case, these individuals need to pay the taxes they owe and likely want to avoid the IRS or state government coming in and garnishing their wages or levying their bank accounts.In order to avoid this forced collection activity by the IRS, the taxpayer must pursue some sort of tax debt relief or else they will be at the mercy of the IRS.And an installment agreement is one of the easier forms of tax relief to obtain.With an installment agreement, the taxpayer has to reach out to the IRS and let them know that they would like to pay them over time.The taxpayer generally has to propose an amount they’d like to pay monthly that the IRS will either approve or deny.\u00a0 The IRS may also give them a figure to pay monthly that the taxpayer may agree to.Types of Installment AgreementsThere are two primary types of installment agreements \u2014 partial-payment installment agreements and full-payment installment agreements.And within full-payment installment agreements, there are several subtypes of installment agreements.Partial-Payment Installment AgreementsPartial-payment installment agreements (PPIAs) are an incredible type of installment agreement that allow you to pay less than you owe to the IRS over time.In a PPIA, you will pay the government a certain amount per month until the government’s time limit to collect on your tax debt runs out \u2014 this will happen on the collection statute expiration date (CSED) for your last-remaining tax debt.So if you are able to convince the IRS to pay a certain amount every month \u2014 let’s call this amount “X” \u2014 and if X multiplied by the number of months remaining until your CSED is\u00a0less than the total amount you owe to the IRS, then you have successfully negotiated yourself into a PPIA.That said, although they are a form of tax relief that allows you to pay less than you owe to the IRS, PPIAs do not necessarily offer the finality that an offer in compromise does.This is because a taxpayer could be removed from a partial-payment installment agreement and reverted to a full-payment installment agreement.In fact Section 6159(d) of the Internal Revenue Code states that the IRS is to review partial-payment installment agreements every two years.Now, this review doesn’t necessarily mean that your partial-payment installment agreement will only last two years; it means that if the IRS determines that you are in a substantially better financial position at that point than you were in when you entered into the PPIA, the terms of your installment agreement may be subject to change.Note that as a practicing tax relief CPA, I routinely see the IRS not revisit a PPIA for as long as four years.However, many taxpayers who enter into a partial-payment installment agreement successfully remain in it all the way until their last CSED, meaning that a portion of their balance was written off as a result of their PPIA.Full-Payment Installment AgreementsA full-payment installment agreement is an installment agreement that will result in you paying off your entire balance to the government upon its completion.For obvious reasons, the IRS is more willing to grant these kinds of installment agreements than partial-payment installment agreements.Here are the kinds of full-payment installment agreements that taxpayers can enter into with the IRS:Guaranteed Installment AgreementsStreamlined Installment AgreementsGuaranteed Installment AgreementsThe IRS is not\u00a0required to approve an installment agreement for any taxpayer\u00a0unless a taxpayer meets the following requirements:The amount of tax (not including penalties and interest) is $10,000 or lessThe taxpayer has been in compliance with their tax filings and payments for the previous five years and remains in compliance throughout the duration of the installment agreementThe taxpayer has not had an installment agreement with the IRS in the last five yearsThe taxpayer is unable to pay their tax liability in fullIf a taxpayer meets these criteria, then the government is obligated under Internal Revenue Code Section 6159(c) to approve a three-year installment agreement.Streamlined Installment AgreementsWhile not guaranteed, a streamlined installment agreement is an installment agreement that the IRS tends to approve for individuals owing $50,000 or less in\u00a0total IRS balance \u2014 including not only taxes but also penalties and interest.If a taxpayer meets this criteria, they can enter into an installment agreement with the IRS to pay off their balance within 72 months or by their tax debt’s last CSED if the CSED falls within the 72-month period after the taxpayer enters into their installment agreement.Note that while entering into an installment agreement with the IRS does not necessarily lien proof a taxpayer, the IRS will generally not file a Notice of Federal Tax Lien for taxpayers in a guaranteed or streamlined installment agreement if they agree to make their installment payments via direct debit.Routine Installment AgreementsA routine installment agreement is any installment agreement that the taxpayer enters into with the IRS that is not a guaranteed installment agreement or a streamlined installment agreement.Unlike for guaranteed or streamlined installment agreements, the IRS may request financial information from the taxpayer in order to approve a routine installment agreement.However, the IRS\u00a0generally does not request financial information from a taxpayer if their balance is currently with the IRS’s Automated Collection System (ACS) and is no greater than $250,000This threshold drops to $100,000 if the taxpayer’s case is currently with a revenue officer, though a revenue officer may still request this information.How to Get an Installment AgreementThe IRS offers taxpayers several options for applying for an installment agreement.Option 1: Apply OnlineTaxpayers can apply for a payment agreement online at irs.gov\/OPA if they owe $50,000 or less in taxes, penalties, and interest.Option 2: Apply Over the PhoneYou can call the IRS at the number on the latest notice you received regarding your balance due or at 1-800-829-1040.Option 3: Apply Via MailYou can apply via mail by completing Form 9465 and sending it in to the IRS.If you owe more than $50,000, you will need to complete and attach Form 433-F to your Form 9465 before sending it in.Option 4: Apply in PersonYou can apply for an installment agreement in person at a local IRS office.Use the IRS’s Taxpayer Assistance Center Office Locator to find the nearest IRS Taxpayer Assistance Center to you.Option 5: Hire a Tax Relief CompanyOf course, if you’d rather somebody else do the work for you, you can hire a tax relief company to negotiate your installment agreement with the IRS.How to Qualify for an Installment AgreementIn order to qualify for an installment agreement, you must have filed the last six years’ worth of tax returns to the extent required.Note that a specific type of installment agreement may have its own specific requirements as discussed above.Alternatives to an Installment AgreementThere are other tax debt relief options than installment agreements that you may qualify for.In fact, these other options may be better for your overall tax and financial situation than an installment agreement \u2014 if you qualify for them.The two most popular tax relief options other than installment agreements are currently not collectible status and an offer in compromise.Currently Not Collectible Status: Currently not collectible (CNC) status is a hardship status that you can petition the IRS to place you in if you can show that you do not have any disposable income to pay them in an installment agreement and that you do not have any accessible equity in assets.\u00a0 The IRS’s 10-year time limit to collect your tax debt continues to run while you are in CNC status.Offer in Compromise: An offer in compromise is an agreement with the IRS to pay less than you owe to them with the balance between written off \u2014 forever!Installment Agreement Frequently Asked QuestionsHere are some common questions people ask about installment agreements.How much does the IRS charge for an installment agreement?For installment agreements set up online, the IRS charges $31 for a direct-debit installment agreement and $149 for other installment agreements.For installment agreements not set up online, the IRS charges $107 for a direct-debit installment agreement and $225 for other installment agreements.Will entering into an installment agreement prevent the IRS from filing a Notice of Federal Tax Lien?The IRS will not file a Notice of Federal Tax Lien against a taxpayer if their balance is $50,000 or less and they enter into a direct-debit installment agreement that will pay off their balance in full within 72 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