With so many tax changes coming into effect this year, it may come as a surprise to many taxpayers just how much they owe in taxes this filing season, versus receiving money on their returns. And if you’re one of the few who can’t pay their tax bill in full? Thankfully the IRS has a few handy options in the form of three payment plans:
1. Guaranteed Installment Agreements (GIA) – 36 months to pay off debts of $10,000 or less;
2. Streamlined Installment Agreements (SLIA) – 72 months to pay off debts of $50,000 or less; and
3. Streamlined Processing – 84 months to pay off debts between $50,000 and $100,000.
Unlike most commercial payment plans, getting one through the IRS is handy as it doesn’t require asset liquidation, manager approval, has little to no financial disclosure, and can be setup via internet or a single phone call.
Need a payment plan for your taxes this year? Here are a few options.
GIA
Able to register for one easily through IRS.gov, a phone call, or by filing Form 9465, as the name implies, this payment plan is “guaranteed” if:
• It’s for individual income taxes only;
• The total balance comes to $10,000 or less, including any penalties or fees;
• All tax returns have been filed; and
• The taxpayer hasn’t signed up for an installment plan in the past five years.
In addition to the benefits listed above, this payment plan is made doubly beneficial to taxpayers as it doesn’t require the IRS to file a public tax lien on their record – allowing debts to be handled quickly and privately.
SLIA
Similar to a GIA, the SLIA can be obtained online, over the phone, or through Form 9465, while a federal tax lien notice can be avoided provided debts owed between $25,000-$50,000 are paid through either automated debit card deposits or payroll deductions.
However, there are a few rules:
• It’s for individual income taxes or other assessments, even unpaid trust fund penalty assessments;
• The total assessed balance (not including fees, penalties, or any interest accrued) comes to $50,000 or less;
• All tax returns have been filed; and
• All debts are paid within the 72-month period.
Streamlined Processing
Newer to the payment plan scene, this IRS pilot program is still in it’s testing phase and as such works a little differently.
For taxpayers owing amounts between $50,000-$100,000, either way you look at it, a federal tax lien will be filed against you. However, you can avoid making financial disclosures to the IRS by agreeing to pay off your debts through direct debit deposits or payroll deductions – otherwise a Collection Information Statement (IRS Form 433-A or 433-F) must be completed.
Boasting an 84-month payment term, it’s unclear whether Streamlined Processing has made a dramatic difference for taxpayers, but it does help to simplify the payment process a little.
For all three plans the IRS does charge a setup fee, varying from $225 for those created over the phone or paid for by check, to $31 for online agreements with a direct deposit established. Low-income taxpayers, however, can apply to have this fee waived.
In addition, most debts are held to a collection statute of limitation of 10 years from the date the balance was assessed, so if applying for a payment plan that extends longer than the statute of limitation, the payment period could be shortened to whenever your statute of limitation may expire.
Any taxpayer who can’t pay their tax bills or meet the payment plan requirements can apply for an Ability-to-Pay agreement – which requires a Collections Information Statement, and in some cases liquidation or borrowing to satisfy their debts.
Want some tips on how to make the most of your payment plans? Subscribe to our blog and stay tuned for part two!
