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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

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IRS Installment Agreements: Guaranteed, Streamlined and Discretionary

Posted on in Internal Revenue Service

installment, IRS, Illinois Tax Law AttorneysMany people, for fairly obvious reasons, are simply unable to pay the IRS everything they owe in one lump sum and need another tax relief option. It's just not reasonable to expect someone to pay tens of thousands of dollars at once; even Wall Street tycoons don't normally keep that much cash sitting around. So the IRS offers the option of monthly payments, or "installment agreements" as a way of repaying your tax debt over time.

There are basically three variations on the IRS installment concept: Guaranteed, Streamlined and Discretionary agreements.

Guaranteed Installment Agreements: The Easiest Option

If you don't owe the IRS too much, and you can make a reasonable monthly payment, you probably qualify for a Guaranteed Installment Agreement. To qualify, all of the following must be true:

  • Your total IRS debt (not including penalties and interest) is less than $10,000;
  • The debt can be paid off in three years or less of equal monthly installments; and
  • You have no unfiled tax returns.

The big reason you want a Guaranteed agreement if you are eligible: you do not have to submit the invasive financial disclosure statement to the IRS. In addition, in most cases the IRS will not file a Notice of Federal tax lien on your assets. A tax lien can mess up your credit and have the IRS on your back for years to come, so you want to avoid this outcome if at all possible.

Streamlined Installment Agreements: The Better Option

Streamlined agreements present a more flexible alternative for taxpayers who owe more than $10,000 or cannot pay the balance off in three years. Streamlined agreements require:

  • A total-owed (debt plus penalties plus interest) of less than $50,000 (for an individual or an out-of-business Sole Proprietor account) or less than $25,000 (for any other kind of business); and
  • The debt can be paid in full within six years or less making monthly installments.

That's it! In some cases, you can still manage to avoid the Federal tax lien filing (see above) if you agree to allow the IRS to take its monthly payments automatically from your bank account. As with the guaranteed installment arrangement, the IRS will not normally require the submission of a complete financial disclosure statement.

Discretionary Installment Agreements: The Hard Road

If you don't meet the eligibility criteria for the guaranteed or streamlined agreements, you can only obtain a 'discretionary' agreement. Basically this means you submit your proposal for how you intend to pay off the balance owing the IRS, and they agree…or not. There are a huge number of rules for how discretionary agreements are evaluated. But ultimately, acceptance is up to the discretion of an IRS bureaucrat, based on his or her evaluation of the time left on the collection statute of limitations, and the taxpayer’s "ability to pay".  In other words, your success in getting such a proposal accepted is dependent on your ability to craft the kind of argument that a bean-counter will accept. That's why ordinary folks in this situation usually come to professionals like us for assistance drafting and negotiating an acceptable proposal.

For further information on IRS installment agreements or any other IRS tax issue, contact one of the skilled Chicago tax lawyers at Chicago-Kent Law School Tax Clinic. To schedule a free consultation, call our office today at 312-906-5041.

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