The Streamlined Installment Agreement is a type of IRS tax debt resolution. It is a special type of Installment Agreement based solely on the size and age of the tax debt. Unlike most other debt-resolution options, including the Installment Agreement, it is advantageous because it does not require the disclosure of your financial information (i.e. income, expenses, assets, etc.), and it ensures that your tax debt is paid off in 5 years or less. A Streamlined Installment Agreement is a simple and sensible IRS tax debt solution if you have recent tax liabilities of less than $25,000.
Who is eligible for Streamlined Installment Agreements
The IRS restricts Streamlined Installment Agreements to taxpayers who (1) have filed all necessary tax returns, (2) owe less than or equal to $25,000, (3) did not acquire the debt more than 5 years ago, and (4) will be able to afford monthly payments that will pay off the tax debt in less than 60 months (5 years). Typically, the minimum payment amount is calculated as the balance due divided by the number of months (i.e. 60), plus an additional 20 percent of the calculated amount to cover interest and penalties.
Streamlined Installment Agreements
Although a Streamlined Installment Agreement is less invasive than a standard Installment Agreement, negotiating for one comes with a price. A Streamlined Installment Agreement is not based on your financials. Thus, it is typically only a sensible tax debt solution if you would have to pay significantly more if you chose to pursue a traditional Installment Agreement. Also, you will still have to pay a user fee to set up a Streamlined Installment Agreement. The size of the user fee depends on how you will make the payments and whether you qualify for a low-income exemption. Finally, setting up a Streamlined Installment Agreement does not stop interest and penalties from building up. Nor does it prevent the IRS from issuing a federal tax lien (if you sell your real estate, some of the money will be taken by the government to help pay off your tax debt). Regardless, there is still something to be said for easily resolving your IRS tax debt and stopping IRS collections before they ever start.
Negotiating a Streamlined Installment Agreement
It's important to do the following to ensure that you negotiate the best possible payment situation.
- (Optional) Contact a tax attorney who specializes in IRS tax debt resolution. A competent attorney will review your financial situation for free to determine if a Streamlined Installment Agreement is your best option. If hired, he or she will also complete the rest of this process.
- Contact the IRS and confirm with the representative that all required tax returns have been filed. Ask the representative for the year of your oldest tax debt.
- If your tax debt is from more than 5 years ago, ask the IRS for the Collection Statute Expiration Date (CSED) associated with that tax year. This is the date your tax debt will expire and you will no longer be responsible for it. If the CSED is within 5 years, you may not qualify for a Streamlined Installment Agreement.
- If required returns are missing, immediately prepare the returns and file them at your local IRS office. Make sure you retain a copy of the return—you may need it when negotiating with the IRS.
- Contact the IRS again and propose a Streamlined Installment Agreement amount (remember, the monthly amount must be enough to fully cover your tax debt within 60 months).
If you qualify for a Streamlined Installment Agreement, you may also use the IRS Online Payment Agreement Application. This allows you (or your authorized representative) to apply for an Installment Agreement online. You will receive immediate notification as to whether the proposed amount is accepted.
After you request a Streamlined Installment Agreement
After the agreement has been arranged, you may want to set up an automated payroll deduction or an automatic check account withdrawal in order not to miss any payments. You may also want to delay your first payment until the next month—typically, the IRS will give you 45 days to make your first payment. Within 30 days, you should receive written notification of the Installment Agreement. Be sure to review it and make sure all payment terms are accurate.