A non-streamlined installment agreement with the IRS is a payment plan designed for taxpayers who owe significant amounts in back taxes or have more complex financial situations.
Although many taxpayers can qualify for the more straightforward streamlined payment plans with the IRS, those with larger tax debts or complicated financials are often required to pursue a non-streamlined agreement.
These agreements are typically for individuals or businesses who owe more than $50,000 in taxes or who have more complicated financial circumstances that require detailed documentation.
The difference between streamlined and non-streamlined agreements lies mainly in the amount of tax owed and the level of financial disclosure required. Streamlined plans are often faster and involve fewer requirements, while non-streamlined agreements necessitate a more thorough review by the IRS.
For those with tax debts beyond a certain threshold, the non-streamlined option is generally the path forward, as it allows for extended repayment periods and provides the flexibility necessary to manage large debts.
What Is a Non-Streamlined Installment Agreement?
A non-streamlined installment agreement is a formal arrangement between a taxpayer and the IRS to repay back taxes over a period of time.
Unlike streamlined agreements, which involve simplified processes for those with smaller debts, non-streamlined agreements are often required for taxpayers who owe over $50,000 or for those who are in more complex financial situations.
These agreements allow taxpayers to repay their debts in monthly installments, but the IRS requires detailed financial disclosures to assess the taxpayer’s ability to pay.
To qualify for a non-streamlined installment agreement, taxpayers must show that they cannot pay the full amount of their debt immediately but are still able to pay it off over time. The IRS will review income, expenses, and assets before determining a suitable monthly payment amount.
In some cases, the IRS may ask for additional documentation to make sure the taxpayer’s repayment plan is realistic given their financial situation.
Non-Streamlined Vs. Streamlined Payment Plans
When comparing a non-streamlined installment agreement to a streamlined payment plan with the IRS, the main differences lie in eligibility and the paperwork involved.
A streamlined agreement is typically available to those who owe less than $50,000 and meet other basic requirements, such as having a stable income and a straightforward financial situation.
These plans are quicker to set up because they don’t require the detailed financial disclosures needed for non-streamlined agreements.
A non-streamlined installment agreement, on the other hand, is necessary for taxpayers who owe more than $50,000, as well as those who have more complex financial circumstances.
For instance, taxpayers with fluctuating income, multiple sources of income, or considerable assets may be required to submit additional documents such as tax returns, statements of assets, and proof of income.
The approval process for non-streamlined agreements is more involved, and taxpayers may be asked to work out a more detailed and customized repayment plan.
Why Would You Need a Non-Streamlined Installment Agreement?
Taxpayers may need a non-streamlined installment agreement for several reasons, most commonly when they owe more than $50,000 to the IRS.
If a taxpayer’s tax debt exceeds this threshold, the IRS will typically require more in-depth financial documentation to make certain the repayment plan is manageable and sustainable.
These agreements are also required for taxpayers who have assets or sources of income that need to be considered in calculating their repayment plan.
A non-streamlined agreement may also be needed if the taxpayer has a complex financial situation that cannot be dealt with by a streamlined payment plan with the IRS.
For example, individuals with significant deductions, dependents, or multiple sources of income might need to show more detailed financial records to support their ability to make regular payments. In these cases, the IRS must review the taxpayer’s entire financial situation, including their income, expenses, and assets, before approving a repayment plan.
IRS Penalty Abatement and Non-Streamlined Payment Plans
One of the benefits of a non-streamlined payment plan is the potential to reduce or eliminate IRS penalties through IRS penalty abatement. Penalty abatement can lower the overall debt by removing or reducing penalties that are added to the original tax debt.
Penalties can accrue quickly, making it even harder for taxpayers to manage their debt, but an abatement may be granted if the taxpayer can demonstrate reasonable cause, such as a medical emergency or a natural disaster that hindered their ability to file or pay taxes on time.
When setting up a non-streamlined installment agreement, taxpayers should consider requesting IRS penalty abatement as part of their arrangement.
This option may help reduce the financial burden associated with the debt, allowing taxpayers to focus on repaying the principal amount rather than the increasing penalties.
The IRS will review the circumstances and decide if abatement is appropriate, which can make a significant difference in the overall payment terms.
Step-by-Step Process for Setting Up a Non-Streamlined Installment Agreement
The process of setting up a non-streamlined installment agreement is more detailed than the streamlined version, but it follows a clear structure.
The first step is to gather all required documentation, including income statements, bank account details, and any assets or liabilities that could impact the repayment plan. The IRS usually requires taxpayers to submit Form 433-A, which is the Collection Information Statement.
This form is used to provide a snapshot of the taxpayer’s financial situation.
Once the necessary documents are collected, the taxpayer submits them to the IRS for review. The IRS will assess the financial information and determine the appropriate payment terms. This process can take several weeks or even months, depending on the complexity of the case.
After the IRS reviews the information, they will propose a payment amount and schedule. If the taxpayer agrees, the agreement is formalized, and the taxpayer begins making payments.
Financial Disclosure in Non-Streamlined Payment Plans
Financial disclosure plays a big part in the approval of a non-streamlined installment agreement. Taxpayers must disclose a full range of financial information, including income, expenses, debts, and assets.
The IRS uses this information to determine the taxpayer’s ability to pay and to calculate a reasonable monthly payment. Full and honest disclosure is necessary because the IRS will use the information provided to determine whether the taxpayer is eligible for a payment plan and how much they can afford to pay each month.
Some taxpayers may be concerned about sharing sensitive financial information with the IRS, but it’s important to realize that full disclosure increases the chances of securing a repayment plan. The IRS uses this information to work with taxpayers, making sure they can repay their debt in a manageable way.
It is also important to note that withholding or misrepresenting financial information could lead to the rejection of the payment plan or even further penalties.
When Will the IRS Approve a Non-Streamlined Installment Agreement?
The IRS does not automatically approve all non-streamlined installment agreements. Approval depends on several things, including the taxpayer’s financial condition and their ability to make regular payments.
The IRS will assess the taxpayer’s income, monthly expenses, and the amount of tax debt owed. If the taxpayer’s financial situation shows that they can afford to make regular payments, the IRS is more likely to approve the agreement.
For taxpayers who owe a significant amount, such as more than $50,000, the IRS will also review the taxpayer’s assets and liabilities. If the taxpayer has considerable assets that could be liquidated to pay off the debt, the IRS may deny the request for an installment agreement.
However, if the taxpayer has little to no assets or income, the IRS may approve the agreement to allow them to repay their debt over time. The approval process may take some time, as the IRS carefully reviews all submitted documents to ensure the repayment plan is appropriate and sustainable.
How the IRS Handles Non-Streamlined Agreements Over $50,000
When a taxpayer owes more than $50,000, the IRS often requires a non-streamlined installment agreement. This is because the higher debt amounts require more in-depth review and financial documentation.
Taxpayers in this category must provide detailed financial disclosures, including information about their assets, liabilities, income, and expenses. The IRS will evaluate this information to determine the feasibility of the proposed repayment plan.
In some cases, the IRS might require additional forms or documents, such as proof of income, asset disclosures, or even a statement detailing the taxpayer’s financial hardship. Larger debts often come with more complicated conditions.
For example, the IRS may require a taxpayer to agree to review their financial situation annually, which may lead to adjustments in the repayment terms. This can be an important step for those who may experience distinct changes in income or expenses.
Taxpayers with debts exceeding $50,000 also face the possibility of a more scrutinized collection process. If a taxpayer fails to comply with the payment plan or defaults on their obligations, the IRS may begin enforcement actions such as IRS seizures of assets to recover the owed amount.
The more complex the case, the more likely it is that these issues could arise if the agreement is not carefully followed.
Impact of Non-Streamlined Installment Agreements on Future Tax Filings
Entering into a non-streamlined installment agreement has a direct impact on how future tax returns are filed. Once a taxpayer has an agreement in place, they are required to adhere to the payment schedule outlined by the IRS.
Filing future tax returns in a timely manner and paying any new taxes owed is imperative for maintaining the agreement. Failure to follow these steps can lead to serious consequences, including the risk of further IRS seizures.
Paying the agreed-upon amounts on time will help prevent additional enforcement actions from the IRS, such as liens or levies. It’s important to stay in compliance with the IRS to avoid complicating the situation.
Filing returns on time, paying the owed taxes, and keeping the installment payments up to date can help the taxpayer stay in good standing.
For taxpayers facing ongoing financial challenges, it’s important to communicate any issues with the IRS early on. If payment becomes difficult, the IRS may allow adjustments to the payment plans or offer other forms of relief, such as an offer in compromise, but these options require proactive communication.
Consequences of Failing to Stick to Your Non-Streamlined Payment Plan
Failing to stick to the terms of a non-streamlined installment agreement can lead to a series of negative consequences. The IRS does not take defaults lightly and may respond by taking enforcement actions.
These actions can include IRS seizures of property, garnishments of wages, or even the revocation of the agreement altogether. When a taxpayer misses a payment or fails to meet the terms of their repayment plan, the IRS may deem the agreement breached.
If an agreement is breached, the IRS may attempt to collect the full debt in one lump sum, which could lead to additional penalties and interest. Not only does this increase the total amount owed, but it can also trigger more severe enforcement actions.
Any missed payments or failure to communicate with the IRS regarding difficulties can escalate the situation quickly. Taxpayers who miss payments on a non-streamlined payment plan should contact the IRS as soon as possible.
In some cases, the IRS may offer the option to reinstate the agreement or modify the terms, but this is not guaranteed. It’s always best to avoid default by adhering to the payment schedule or getting help if a financial hardship arises.
Negotiating an Offer in Compromise with a Non-Streamlined Payment Plan
For taxpayers struggling to keep up with their non-streamlined installment agreement, pursuing an offer in compromise might be an option. For less than the full amount owed, an offer in compromise allows taxpayers to settle their tax debt. This can be a viable solution for those who are unable to pay their full debt due to financial hardship.
While in a non-streamlined payment plan, taxpayers can request an offer in compromise if they believe that they cannot realistically pay off their debt under the current agreement.
The IRS evaluates offers on a case-by-case basis, taking into account the taxpayer’s financial situation, including income, expenses, and assets. It is necessary for taxpayers to submit accurate and thorough financial disclosures when applying for an offer in compromise to increase the likelihood of acceptance.
This route can be beneficial for individuals who owe hefty amounts and face financial difficulties that make paying the full debt impossible. However, applying for an offer in compromise while under a non-streamlined agreement requires careful consideration.
Consulting with a tax professional to assess eligibility and fully comprehend the process can help taxpayers avoid mistakes that could further complicate their situation.
Modifying Your Non-Streamlined Payment Plan
Life circumstances change, and sometimes a non-streamlined installment agreement needs modification. A taxpayer who experiences a significant financial hardship or a change in income may need to adjust their payment plan to reflect their new situation.
The IRS allows for these modifications but requires the taxpayer to submit updated financial information to support the request.
Modifications might include lowering monthly payments, extending the term of the agreement, or temporarily suspending payments if the taxpayer is facing severe financial hardship.
When requesting a modification, it’s important to submit current documentation, such as updated pay stubs, tax returns, and an account of any changes in personal circumstances. The IRS will review the information and determine if the modification is feasible.
If you find yourself unable to meet your original payment obligations, don’t ignore the situation. Contacting the IRS immediately and requesting a modification can help prevent IRS seizures and avoid further penalties.
The IRS is generally willing to work with taxpayers to make certain payments are manageable, especially when there is a legitimate change in financial circumstances.
IRS Seizures and How They Relate to Non-Streamlined Agreements
The risk of IRS seizures is a serious concern for taxpayers under a non-streamlined installment agreement. Seizures refer to the IRS’s power to take possession of a taxpayer’s assets to satisfy an outstanding tax debt.
This can include the seizure of property, bank accounts, or wages. If a taxpayer fails to adhere to the terms of their agreement, the IRS may resort to these measures.
To avoid IRS seizures, it’s important to make payments on time and communicate with the IRS if there is difficulty maintaining the agreed-upon terms. In some cases, taxpayers can work with the IRS to create a more manageable payment plan.
Ignoring IRS notices or failing to make payments could lead to the initiation of more aggressive collection methods, including seizures.
If you are at risk of IRS seizures, consider seeking professional assistance to explore alternatives like modifying your payment plan or applying for an offer in compromise. Tax professionals can help protect your assets and negotiate with the IRS on your behalf.
What Happens if You Can’t Afford the Agreed Payments?
If a taxpayer struggles to afford the agreed-upon payments under a non-streamlined installment agreement, it’s important to take action before missing a payment. The IRS offers several options for those in financial distress.
One option is to request a reduction in monthly payments, which could make the plan more manageable. Taxpayers can also apply for a temporary suspension of payments if they are experiencing a temporary financial hardship.
Contact the IRS as soon as possible if you are struggling with payments. Ignoring the situation can lead to IRS seizures and additional penalties. Depending on the situation, the IRS may allow the taxpayer to modify the terms of their agreement or suggest other forms of relief, such as an offer in compromise.
Working with a tax professional is a good idea for those who are uncertain about their options. A professional can guide you through the process and help you find the best solution for your financial situation.
Why Rush Tax Resolution Can Help You with Non-Streamlined Installment Agreements
Rush Tax Resolution knows that dealing with a non-streamlined installment agreement with the IRS can be overwhelming. Our team specializes in helping taxpayers with the complexities of IRS payment plans.
We work closely with clients to negotiate the most favorable terms, whether it’s setting up a manageable payment schedule, applying for an offer in compromise, or seeking IRS penalty abatement.
Our experts are dedicated to helping you avoid IRS seizures and minimize penalties. We know the ins and outs of the IRS process and can help you secure the best possible outcome.
If you have questions about your non-streamlined installment agreement with the IRS or need help negotiating a payment plan, get in touch with us at Rush Tax Resolution today for a free consultation.