Overview: The IRS pilot program allows individual taxpayers with an assessed balance of tax, penalty and interest between $50,000 and $100,000 to enter into a direct debit installment agreement. Now, individual taxpayers who owe up to $100,000 can pay through monthly direct debit payments for up to 84 months (7 years).
While the IRS generally will not require a financial statement, they may need some financial information from the taxpayer such as bank account information to set up the direct debit agreement. The test project on expanded processing of Installment Agreements is scheduled to run through September 30, 2018.
But based on test results, the expanded criteria for streamlined processing of installment agreements may be made permanent. At this point the IRS has continued the program thus far, but it has not been made a permanent IRS relief program.
Requirements: In order to apply for the program, you must be in tax compliance. This means that you have filed at least the past six years of returns and made any required estimated tax payments (if applicable).
Liens: Federal Tax Liens can be filed under this program. If you are very concerned about federal tax liens and no tax liens have already been filed, you should pay the balance under $50,000 (if possible) to qualify for the IRS Fresh Start Streamline agreement. However, if you cannot afford to pay the balance under $50,000.00 and a tax lien has already been filed, a taxpayer may request to remove the lien once the total account balance is under $25,000 and 3 direct debit installment agreement payments have been made. Taxpayers also need to request this in writing.
Pros: The upside to the 84-month pilot program is no financial statement is required and it is not based on ability to pay. This is especially beneficial for individuals that have a high income or lots of equity in assets such as a home, car, or retirement account. Also by setting up the installment agreement, you will be in good standing with the IRS. This means the IRS will not take any additional action to collect the tax debt such as Bank Levies, Social Security Levies, Wage Garnishments, or Seizures.
Cons: Similar to the IRS 72 month Fresh Start installment agreement, the arrangement must pay all tax periods within the statute. Generally the IRS has 10 years to collect the tax from the date of assessment. The date at which the tax expires and is no longer legally collectible is called the Collection Statute Expiration Date (“CSED”).
If you have a tax period that is about to expire due to the CSED, the pilot program payment maybe very high to ensure each period will be paid within the statute. In this case, it may be better to have one of our Atlanta Tax Attorneys look at a financial based payment plan that may be lower based on your individual circumstances. In order to remain in Fresh Start agreement, you must continue to be tax compliant, i.e. file and pay any future tax due on time. If you fail to remain tax compliant by filing a late return or creating a new balance due, it can default your agreement and you will have to ask to reinstate the agreement.
The more times you reinstate the installment agreement, the more difficult it become. Thus, it is very important for taxpayers to remain tax compliant because it will save you interest and penalties on the current year and prevent you from a continuous circle of always owing tax. However, interest and penalties will continue to accrue on the old tax liabilities included in the payment plan.