What is an IRS Guaranteed Installment Agreement – Qualifying Factors, and More

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Installment Agreements are the most popular IRS tax debt resolution plans. There are a variety of Installment Agreements that the IRS offers, including Guaranteed Installment Agreements, Streamlined Installment Agreements, Non-Streamlined Installment Agreements, and Partial Payment Installment Agreements. Each payment plan has specific qualifying factors. In a Guaranteed Installment Agreement, you can pay your tax debt in monthly installments if you owe $10,000 or less in tax debt. 

What is a Guaranteed Installment Agreement?

A Guaranteed Installment Agreement is an IRS tax debt payment plan which allows payment of full tax debt in installments within 36 months. You can only qualify for it if your tax debt is $10,000 or less. When calculating the total tax debt in order to qualify, exclude penalties and interest that the IRS charges on back taxes.

Using a Guaranteed Installment Agreement, you can pay off your tax debt without needing to undergo the exhaustive IRS processes regarding the assessment of the taxpayer’s financial condition. No managerial approval is conducted by the IRS when processing applications for a Guaranteed Installment Agreement. 

How to Qualify for a Guaranteed Installment Agreement

 It is simpler to qualify for a Guaranteed Installment Agreement than other IRS tax debt resolution programs. Since the amount owed is less, the IRS does not carry out a comprehensive financial analysis of the taxpayer. However, you need to have filed all your tax returns that you were required to file.

What is an IRS Guaranteed Installment Agreement – Qualifying Factors, and More

The agency usually checks tax returns from the past five years, so make sure that you have filed tax returns for at least the past five years before applying. Without it, the IRS will not entertain any applications for a Guaranteed Installment Agreement.

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If your tax debt is $10,000 or less without penalties and interest, and you have filed all your tax returns, then you can qualify for a Guaranteed Installment Agreement. Even if you can afford to pay your full tax debt in a single payment, you can choose to pay it in installments using a Guaranteed Installment Agreement.

 Typically, for a Guaranteed Installment Agreement, the IRS does not place a lien to secure the collection of back taxes. In rare cases, however, a revenue officer may file a lien. 

How to Apply for a Guaranteed Installment Agreement

You can apply for a Guaranteed Installment Agreement online, through postal mail, in person, or by phone.

The setup fee for a Guaranteed Installment Agreement is $31 if you pay through automatic withdrawals (direct debit). In the case of Non-Direct Debit, the setup fee is $149. Low-income taxpayers can apply for a setup fee waiver or reduction in the setup fee.

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In the case of Non-Direct Debit payments, you can make the payments through check, debit or credit card, or money order. Even if you chose Non-Direct Debit, you could still make payments directly from your checking or savings account.

Paying Monthly Installments

 After entering the agreement, you will need to pay your tax debt, including penalties and interest, within 3 years (36 months) from the date of the start of the agreement. The amount you pay in each installment every month depends upon your total back tax amount and your ability to pay.

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Remember that even though the IRS does not include penalties and interest in the qualifying amount cap for this agreement when paying your tax debt, you will need to pay the full tax debt amount, including penalties and interest. Therefore, before applying for a Guaranteed Installment Agreement, calculate your total back tax amount with penalties and interest to see if you can pay it all within 36 months.

What If I Don’t Qualify?

In case you don’t qualify for a Guaranteed Installment Agreement because of the qualifying dollar cap, you can consider applying for a Streamlined Installment Agreement, which has a higher monetary cap.

There are other Installment Agreements that you can consider applying for, such as a Non-Streamlined Installment Agreement, Partial Payment Installment Agreement, and In-Business Trust Fund Express Installment Agreements.

Apart from Installment Agreements, there are other IRS tax debt resolution plans that you can consider, such as an Offer in Compromise and the Currently Not Collectible status. Both are open to those taxpayers that cannot pay their full back taxes or cannot pay any amount of their back taxes, respectively.

What about Penalties and Interest?

Before applying for an IRS payment plan, it is good to know exactly how much you owe in back taxes. There are two kinds of penalties the IRS charges on back taxes: failure-to-pay penalty and failure-to-file penalty. The failure-to-file penalty is 5% and failure-to-pay penalty is 0.5%. Where both the penalties apply, the maximum penalty charged is 5%. Penalties are charged every month on the total back taxes.

Back taxes also accumulate interest, which is charged at the federal short-term rate plus 3%. Interest compounds daily, increasing the tax debt quickly. Combine both penalties and interest, and the tax debt amount can increase substantially over months.

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The IRS keeps charging interest and penalties even after you enter a payment plan and begin making payments. Penalties and interest are then charged on the balance that remains unpaid. Until you have paid all of your tax debt, penalties and interest keep accruing on your balance.

Power of Attorney  

You can apply for an IRS tax debt payment plan yourself or have a tax attorney apply on your behalf by granting him/her a Power of Attorney. A tax lawyer is qualified to represent you before the IRS and hold all communications with the IRS on your behalf. Your tax attorney can apply for the appropriate IRS plan for your case, conduct negotiations with the IRS if needed, look for ways to reduce your back tax liability, and conduct in-person and mail communications with the IRS.

Whether you choose to do it yourself or hire help, you need to consider two major factors before applying for any IRS resolution plan. Make sure you fulfill the qualifying factors of the payment plan you choose, and you can fulfill the agreement’s payment criteria.

Since the IRS’s primary aim in back tax collection is to collect the greatest amount, you may need to hire a tax professional. This is especially true if you want to reduce your back tax amount using penalty abatement, waivers, reduction in setup fee, and so forth when applying for a Guaranteed Installment Agreement. 

 

About the Author

Joe Valinho

My name is Joe Valinho (President) and I built Justice Tax, LLC on one guiding principle – Justice for ALL taxpayers. Every day countless Americans who are worried and stressed ask our team of Attorneys, Enrolled Agents, and CPAs if we would fight for them. With $2.2 billion of back taxes solved and over 20,000 taxpayers helped, our answer is always “Yes” to getting the justice they deserve, and we can do the same for you and your family. Keeping with our founding fathers, “Life, Liberty, and the Pursuit of Happiness,” we created the Client Bill of Rights, ensuring that you receive RESPECT, while we navigate through the collection process. We will work countless hours to provide you FREEDOM from the IRS, and finally the Peace of Mind you deserve. We are on a mission to bring Truth, Justice, and Liberty for All taxpayers. Let us help you.

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