When taxpayers owe money to the Internal Revenue Service (IRS), the agency offers several payment options to help them settle their debt. One of the most popular options is an installment agreement, which allows taxpayers to pay their outstanding balance in monthly installments. However, many taxpayers wonder how long they can prolong their installment agreement. In this article, we will examine the different types of installment agreements, their duration, and some factors that may affect the length of your agreement.
Types of Installment Agreements
The IRS offers three types of installment agreements to taxpayers: guaranteed, streamlined, and non-streamlined.
Guaranteed Installment Agreements: If taxpayers owe up to $10,000, they can apply for a guaranteed installment agreement. This type of agreement allows taxpayers to pay their balance in equal monthly installments for up to three years.
Streamlined Installment Agreements: Taxpayers who owe between $10,000 and $50,000 can apply for a streamlined installment agreement. This type of agreement allows taxpayers to pay their balance in equal monthly installments for up to 72 months or six years.
Non-streamlined Installment Agreements: Taxpayers who owe more than $50,000, or cannot pay their debt within the streamlined agreement period, can apply for a non-streamlined installment agreement. The duration of these agreements is not fixed, but taxpayers must provide detailed financial information to the IRS to determine the payment terms.
Factors that Affect the Length of Installment Agreements
Several factors can affect the duration of installment agreements. These include:
The amount owed: As we have seen, the amount of debt owed to the IRS determines the type of installment agreement a taxpayer can apply for. Guaranteed agreements have a shorter duration than streamlined agreements, which in turn have a shorter duration than non-streamlined agreements.
Financial situation: Taxpayers who can pay off their debt quickly may be granted a shorter duration installment agreement. Conversely, taxpayers who cannot pay that much may be granted a longer duration agreement.
Interest and penalties: The IRS charges interest and penalties on unpaid tax debt. This means that the longer it takes to pay off the debt, the more interest and penalties taxpayers will accrue. This may increase the duration of their installment agreement.
Conclusion
In conclusion, the duration of an IRS installment agreement depends on several factors, including the amount owed, financial situation, interest, and penalties. Taxpayers who owe up to $10,000 can apply for a guaranteed installment agreement that lasts up to three years, while those who owe between $10,000 and $50,000 can apply for a streamlined agreement lasting up to six years. Taxpayers who owe more than $50,000 can apply for a non-streamlined agreement that does not have a fixed duration. If you need help with your IRS installment agreement, consider consulting with a tax professional who can guide you through the process and help you find the best payment option for your situation.