Taxation & Estate Planning

5 benefits to repaying the IRS with a streamlined installment agreement

By howardlevy

Some things can be simple to negotiate with the IRS.  If you are looking for a great way to repay an income tax liability to the IRS, consider a streamlined installment agreement.

Streamlined installment agreements are available to anyone who owes under $25,000 and can afford to repay their balance in five years.  If you qualify, the IRS will automatically approve the installment agreement, and there should be no questions asked.

Here are your advantages in using a streamlined installment agreement:

1.     Eliminates disclosure of your finances to the IRS.  The IRS does not require a financial statement (Form 433A or Form 433F) for streamlined installment agreements.   That’s right – no disclosure of where you work, where you bank, what your assets are.

2.     Simplicity in IRS negotiations.  A streamlined installment agreement can be made with one phone call to the IRS.   Just tell them you owe under $25,000 and want to repay the liability over five years under streamlined criteria.

3.     No documentation is required to be given the IRS.  To enter into a regular installment agreement, the IRS usually will require personal documents from you – recent paystubs, three month’s bank statements, verification of your living expenses.  If you notify the IRS that you are electing to repay them with a streamlined installment agreement, no documents are required to be provided.

4.     Eliminates the use of IRS financial standards.  In most installment agreement requests, the IRS will apply its financial standard allowances to your living expenses.  The result is often a request for you to pay more than you can afford.  However, in streamlined installment agreements, the IRS cannot apply their expense allowances as they do not have the information to do so – remember, no financial disclosure is required. Because of that, streamlined installment agreements can result in your payment being lower than if you disclose your finances and the IRS applies their expense allowances.

Example:  You owe the IRS $20,000.  Before you call the IRS, you complete an IRS financial statement.  After applying their expense allowances, you realize the IRS might ask you to pay $1,000/month.  You can afford $400.00, which will pay off the liability in five years and permit you to qualify for a streamlined agreement. You call the IRS, request the streamlined agreement, do not provide the financial statement, and get the $400/month payment.

5.     Saves time and money.  No financial disclosure + no documentation = less time negotiating with the IRS.  If you are hiring a professional to represent you before the IRS, less time should equal less money.  Even if you try it yourself, you are saving time (and aggravation) by going the streamlined route.

Making arrangements to repay the IRS does not have to involve fear or intimidation.  A streamlined installment agreement not only simplifies the process, but provides benefits to you in negotiating with the IRS.

Full post as published by IRS and the Law on December 19, 2010 (boomark / email).