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BACK TAXES AND TAX DEBT

The 3 most common IRS payment plans

Jim Buttonow, CPA, CITP

SVP Post-Filing Tax Services

Updated on: July 07, 2022

Each year, millions of taxpayers set up an IRS payment plan when they file their returns and can’t pay what they owe. IRS statistics show that over 70% of these taxpayers use one of these payment plans.

The simplest long-term IRS payment plans to set up are:

  • The 36-month payment plan, called a guaranteed installment agreement (GIA)
  • The 72-month payment plan, called a streamlined installment agreement (SLIA)
  • The full-pay non-streamlined installment agreement (NSIA)

A note on the NSIA: As of March 2020, the IRS replaced its 84-month agreement with the full-pay NSIA. The NSIA allows you to pay your tax bill before the collection statute of limitations expires, which is generally up to 120 months (10 years), unless the statute is extended.

Why they are simple

If you owe less than $250,000 and meet the terms and conditions of the programs, you can set up one of these agreements with a phone call to the IRS.

These plans require a lot less paperwork than installment agreements that require you to send documents proving your ability to pay. For these simple agreements, you don’t have to file financial information with the IRS or prove your ability to pay. You also won’t have to sell off or borrow against your assets.

There are two caveats to these plans

  • You need to file all your required tax returns.  Generally, this means that you have filed for at least the past 6 years to set up any installment agreement.
  • You may have a limited number of months to pay if the time left on your collection statute is less than the time the agreement allows for. For example, you get up to 72 months to pay your tax bill in a SLIA--or the collection statute expiration date--whichever is shorter. If your tax bill is more than 4 years old, you should research your account to find out when your collection statute expires.

Here is a summary of these three simplified IRS payment plans:

 

Guaranteed Installment Agreement (GIA) (36-month agreement)

Streamlined Installment Agreement (SLIA) (72-month agreement)

Full-pay non-streamlined installment agreement (Full-pay NSIA)

Maximum payment terms

36 months (or before the collection statute expiration date, whichever is earlier)

72 months (or before the collection statute expiration date, whichever is earlier)

Before the collection statute expires (generally up to 120 months)

Maximum unpaid balance

Total tax of $10,000 or less (you may owe more in penalties and interest)

Assessed tax balance of $50,000 or less

Total balance of up to $250,000

Financial disclosure required?

No

No

No

Automatic payments required?

No

Yes, if the balance is between $25,001 and $50,000

No

IRS files Notice of Federal Tax Lien?

No (IRS isn’t required to make a lien determination, but may make one)

No (IRS isn’t required to make a lien determination, but may make one)

Yes*

Asset liquidation required

No

No

No

* Some taxpayers who owe less than $250,000 for the 2019 tax year only may qualify to set up an installment agreement without a federal tax lien.

Other options

If you can’t meet the terms of these agreements or can’t pay the payment plan amount, there are other options based on your financial situation. To set up one of these ability-to-pay installment agreements, you would need to provide financial information proving how much you can pay each month (called monthly disposable income). You may also need to sell or borrow against your assets to pay down or pay off your tax debt.

If you have no monthly disposable income and you’re experiencing financial hardship, there are other options, such as currently not collectible status (temporary payment deferral) or an offer in compromise (a tax settlement with the IRS for less than the amount you owe).

For help addressing your tax issue, visit Jackson Hewitt’s Tax Resolution Hub to see the various ways we can help you.

About the Author

Jim Buttonow, CPA, CITP, is the Senior Vice President for Post-Filing Tax Services at Jackson Hewitt. He’s been a leader in helping taxpayers and tax professionals resolve tax problems with the IRS, where he had worked for 19 years in various compliance-enforcement positions. Prior to his current role, Jim’s consulting practice focused on the areas of tax controversy and tax administration, which included leading product development on tax problem software for tax professionals, testifying before Congress, advocating for IRS transparency and efficiency, and proposing innovative large-scale solutions for taxpayers and tax professionals. Jim is also the author of Tax Problems and Solutions Handbook, a publication aimed at helping tax pros work more effectively in post-filing matters and resolving their clients’ most common tax problems.

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