What Are the Pros and Cons of An IRS "streamlined" Installment Agreement?
Sept. 23, 2021
What Is an IRS "streamlined" Installment Agreement?
An IRS streamlined installment agreement is an agreement a taxpayer makes with the IRS to pay a tax debt in full that is less than $50,000.00 over 72 months or the remaining time on the IRS' collection statute period. These types of agreements are very common and come with some benefits for certain taxpayers, and negatives for others.
What Are the "pros" of An IRS "streamlined" Installment Agreement?
TAXPAYER IS ABLE TO AVOID PROVIDING FINANCIAL DISCLOSURE
A 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 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 usually a benefit.
AVOID LOSS OF ASSET
When a taxpayer sets up a full pay streamlined plan, 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 before agreement is made. A streamlined agreement avoids this.
AVOID IRS LIEN NOTICE FILING
If the balance is less than $50,000.00 "assessed" when the 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 agree to abstain from filing the lien notice as long as the payment is auto-debited from a bank account.
OBTAIN IRS WITHDRAWAL OF LIEN NOTICE
If the balance is less than $25,000.00 "assessed" and a notice of federal tax lien has already been recorded with the County, the IRS will agree to withdraw the tax lien notice after 3 payments are made from an auto debited account.
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 streamlined agreement are easy to set up assuming the debt is at $50,000.00 "assessed", necessary returns have been filed, and the taxpayer can provide the IRS with a 433d form that provides some information including the bank account information necessary to auto-debit the payment from.
CAN DO WITHOUT LEGAL HELP
The only legal help necessary to arrange a streamlined agreement is advice from an experienced tax attorney about whether a streamlined agreement with the IRS will make better sense than an "ability to pay" agreement, an offer in compromise, or a bankruptcy filing.
What Are the "cons" of An IRS "streamlined" Installment Agreement?
A streamlined installment agreement takes all of the debt, penalty and interest that has accrued and new penalty and interest and spreads it out over 72 months or the time remaining for the IRS to collect whichever is shorter. 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 streamlined agreement. If the taxpayer can't afford the streamlined amount, other options should be reviewed before arranging the plan.
IRS HAS BANK ACCOUNT INFORMATION
Once this type of arrangement is set up, the IRS will begin debiting the payment each month. Some taxpayers learn the hard way that if the financial situation changes, it can be difficult to get the IRS to stop the payments or adjust them.
Taxpayers have to pay close attention to the account each month to ensure funds are present to make the payment.