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Guaranteed Installment Agreements

Updated on June 21, 2016

If you owe back taxes to the IRS, you have a number of options for resolving your tax debt. The one most commonly used is the installment agreement, in which you pay a portion of your taxes each month until they are paid off. There are two types of installment agreements (IAs): Guaranteed/Streamlined and Non-Guaranteed. For the sake of brevity, I’m going to focus on the former in this article; I will discuss the latter at a future time.

The vast majority of taxpayers in debt to the IRS will qualify for a guaranteed IA. The requirements for individuals are as follows:

-Owe less than $50,000 in combined income taxes, penalties, and interest (less than $25,000 for businesses)

-Have filed (or file before the IA) all tax returns for the last 5 years

-Not be able to pay the amount in full out of savings

-Be able to pay the full amount in 72 months or less

-Not have had an active installment agreement within the last 5 years.

-Fill all required tax returns and pay all required taxes while the IA is in effect

While the installment agreement is in effect, you must make each of your required monthly payments; the easiest way to do this is to have your payments taken directly out of your bank account each month. The IRS will also seize any tax refunds you have due during this period and apply it to your balance. If you default on your IA, the IRS can and will pursue other collection options against you, including liens, levies, and so forth.

It is possible to modify an installment agreement if you incur another tax debt during the IA, but it becomes more complicated and the payment increases.

The IRS charges a fee of $120 to set up the installment agreement. This fee is not credited to your tax debt.

A professional tax practitioner can help you set up an Installment Agreement if you don't want to do it yourself.

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