What Are the Pros and Cons of An IRS "Non-Streamlined" Installment Agreement?
Sept. 27, 2021
What Is an IRS "non-Streamlined" Installment Agreement?
An IRS non-streamlined installment agreement is an agreement a taxpayer makes with the IRS to pay a tax debt in full when it is between $50,000.00 and $250,000.00. The taxpayer must agree to pay the debt in full on or before time that remains before the IRS' collection statute expiration date runs out. These types of agreements are relatively new, and come with some benefits for certain taxpayers, and negatives for others.
What Are the "pros" of An IRS "non-Streamlined" Installment Agreement?
TAXPAYER IS ABLE TO AVOID PROVIDING FINANCIAL DISCLOSURE
A non-streamlined installment agreement helps the taxpayer avoid the additional difficulty related to providing the IRS a complete breakdown of income, budget, assets and other historical financial information. If the non-streamlined payment plan amount is going to be less than the taxpayer would be able to arrange by providing the financial information, avoiding the disclosure is typically a benefit.
AVOID LOSS OF ASSET
When a taxpayer sets up a full pay non-streamlined plan, the IRS usually becomes disinterested in assets. In a plan that pays only a portion of the IRS debt before the 10 year statute of limitations clock on collection runs, the IRS will often look to assets to supplement the payment of the debt. A non-streamlined agreement usually avoids this problem.
INTEREST AND PENALTY ARE REDUCED
A payment plan with the IRS will reduce the amount of interest and penalty the IRS assesses and allows to accrue.
SIMPLER TO ARRANGE
Full pay non-streamlined agreements are easy to set up... assuming the debt meets the criteria, necessary returns have been filed, and no revenue officer has been assigned to the case.
CAN DO WITHOUT LEGAL HELP
The only legal help necessary to arrange a non-streamlined agreement is the advice from an experienced tax attorney about whether a non-streamlined agreement with the IRS will make more sense than an "ability to pay" agreement, an offer in compromise, "streamlined" agreement, or a bankruptcy filing.
What Are the "cons" of An IRS "streamlined" Installment Agreement?
A non-streamlined installment agreement takes all of the debt, penalty, and interest that has accrued and new penalty and interest and spreads it out over the collection statute period that remains. For many taxpayers, the amount they'd have to pay in an "ability to pay" installment agreement is less than the amount necessary to create a non-streamlined agreement. If the taxpayer can't afford the non-streamlined amount, other options should be considered.
IRS LIEN NOTICE FILING
If the balance is between the $50,000.00 and $250,000.00 when the non-streamlined agreement is arranged with the IRS automated collection unit, and no "notice of federal tax lien has been filed with the County Recorder, the IRS will file the lien notice. If the debt is close to the $50,000.00 amount (assessed), the taxpayer with no lien notice filings may want to pay the debt to the $50,000.00 (assessed) threshold and use the streamlined installment agreement in order to avoid new lien notice recording/filing.
MUST PAY DOWN TO OBTAIN IRS WITHDRAWAL OF LIEN NOTICE
In order to remove the lien notice, the taxpayer would need to pay down the debt to less than $25,000.00 "assessed" and change the agreement to a "streamlined" agreement. After 3 months in the streamlined agreement the taxpayer can ask for lien notice withdrawal.
IS IT THE BEST OPTION?
As the non-streamlined agreement is simpler to arrange than many other IRS debt options, taxpayers will often choose it before fully understanding other options, whether the taxpayer can truly afford the payment, or that the IRS will record a lien notice once the agreement is in place. Sometimes, arranging a non-streamlined agreement will be a negative for the taxpayer overall. It's best to determine the pros and cons of all of the taxpayer's potential options before choosing a non-streamlined agreement as an IRS debt solution.