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Streamlined installment agreements just got more flexible

How can you catch up on back taxes? An announcement from the IRS last week could help.

If you had too little withheld from your wages or took an early disbursement from a retirement account, you might have a significant tax obligation. Very few have liquid assets sitting around to pay the bill when it is in the tens of thousands. The IRS understands this fact and offers installment agreements that spread payments out over a number of years.

In this post, we explain how the IRS streamlined installment agreement program is changing.

Why does streamlined processing matter?

Government agencies have started streamlining processes to squeeze out efficiencies. What this has meant for the installment application process is removing the need for financial analysis and managerial approval.

Taxpayers receive the benefit of faster processing times.

But the cap on the amount of back taxes, penalties and interest that qualified for the "streamlined" process has been $50,000. The amount due needed to be repaid within 72 months. If you owed $35,000, the monthly payment was roughly $486.

Expanded criteria

Testing out a new program, the IRS will now allow you to use the streamlined process even if you owe up to $100,000 in back taxes, penalties and interest. While not yet permanent, the program will run through September 30, 2017.

More time to pay

The minimum monthly payment will be the greater of  

  • The total amount owed divided by 84 (instead of 72 as before)
  • An amount necessary to pay the balance within the Collection Statute Expiration Dates (CSED) 

In the past, a strict 72-month analysis was the only option. This change should provide more flexibility to keep the amount of monthly payments manageable.

You do need to file all required tax returns before requesting an installment agreement. As long as you continue making payments, an installment agreement will halt collection actions such as a levy of your savings or garnishment of wages. Some penalties and interest may also be avoided.

Ignoring back taxes will not make them go away. Being proactive can avoid a lien or more serious collection tactics. To learn whether an installment agreement might be a solution to your tax problems, speak with one of the experienced tax attorneys at Brown, P.C. We can run the numbers and help you make an informed decision.

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