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Expanded streamlined processing for installment agreements

| Oct 7, 2016 | Tax Liens

Installment agreements are available in most cases when you owe taxes to the IRS. This can allow you to make manageable monthly payments and avoid collection actions like wage garnishment or a levy of your bank account.

The IRS announced last week that it will be testing expanded criteria now through September 17, 2017. Depending on the results the changes may become permanent.

Increased tax balances

The streamlined process removes the requirement for managerial approval or a review of your finances. This allows for faster responses.

In the past the cap was $50,000 in back taxes, penalties and interest to use the streamlined program. As part of the test, this criteria had been expanded to $100,000.

Longer repayment terms

Calculating the amount of monthly payments used to require a strict formula. You had 72 months to repay the tax debt. Simple division resulted in the minimum acceptable monthly payment. A tax debt is rarely a round number, so assume you owe $16,545. The minimum payment would be roughly $230.

The way that the IRS calculates these payments is going to change to provide more flexibility.

The minimum monthly payment will be the greater of the balance owed divided by 84 or what would be required to pay off the liability before the Collection Statute Expiration Date (CSED). With the longer time frame, monthly payments might be more manageable – on a debt of $62,560 minimum payments would be about $745 over 84 months. An analysis of the CSED may affect this amount, however. 

The new program does not apply to business tax debt. You also must be current in filing your tax returns before you apply.

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