IRS Relaxes Rules for Streamlined Installment Agreements

Taxpayers who owe the IRS less than $50,000 now have another repayment option under a newly unveiled plan presented by the Internal Revenue Service. For those who have the ability to repay within 72 months, the IRS is willing to enter into an automatic repayment plan with minimal disclosure. This new alternative is open to both individuals and businesses. See Instructions for Form 9465-FS.

The new program is very similar to the IRS' previous streamlined installment agreement procedure that allowed for automatic enrollment into a monthly repayment plan if certain conditions were met. With the increase in the number of eligible taxpayers, the push is for direct debit payments with a strong incentive plan. The taxpayer must agree to have the monthly payments directly debited from their bank account with payments being applied on the same date every month. On the upside, participants do not have to disclose their financial information to the IRS as a precondition of acceptance.

Who Qualifies?

The new program applies to any business or individual who owes up to $50,000 and can fully satisfy the liability within 72 months. For individual taxpayers, it specifically allows for installment agreements to satisfy income taxes, Trust Fund Recovery Penalty ("TFRP") assessments and any taxes assessed against a person resulting from their involvement in partnership or LLC.

Consistent with every other IRS resolution option, you must be in current compliance with all of your other IRS obligations. For individuals, this means that all required income tax returns are filed. If self-employed, the Taxpayer must have also reemitted sufficient estimated tax payments for the current year.

How Do I Enroll?

To be part of this new program you have two options. First, you can complete Form 9465-FS, Installment Agreement Request, and submit it directly to the IRS for review. If you agree to make direct debit payments from your bank account, the only documentation required is Form 433-D, Installment Agreement. However, if you choose another method of payment under the new program, then you also have to disclose your financial resources to the IRS via Form 433-F, Collection Information Statement. Thus, there is a significant reason for making payments via direct debit. Doing so avoids the administrative burden associated with disclosing one's finances.

The second option is to simply apply online at http://www.irs.gov/individuals/article/0,,id=149373,00.html The online application requests the same information disclosed on Form 9465-FS, and the same rules apply with respect to the Form 433-F.

Once accepted, you must remit the required one-time enrollment fee of $105. Certain qualifying low-income taxpayers may be eligible for a reduced fee of $43.

What's the Catch?

There does not appear to be one. In fact, this new program seems to be the Service's acknowledgement that the recent economic recession has taken a significant toll on a lot of Americans' resources. In response, and in an effort to get more people repaying their past due tax obligations, the streamlined process makes it quicker and more efficient to get individuals and businesses back into the system.

If you find yourself in this or a similar situation, give us a call we will be happy to discuss your matter and the options that you have available to you.

Chaya Kundra, Esq.