When you have problems with the Internal Revenue Service (IRS), it’s never easy. However, when you find yourself owing more taxes than you can pay at once, the IRS does offer some forms of relief.
One such option is a “guaranteed installment agreement.” It’s one of the simplest ways to break down your tax bill into more manageable monthly payments.
What’s a guaranteed installment agreement?
A guaranteed installment agreement is basically the IRS saying, “We will allow you to pay us what you owe in small chunks, as long as you’re not asking for anything particularly unreasonable.” The big perk of this agreement is that the IRS won’t file a lien on your property if you’re on this type of plan and continue making payments.
Who qualifies for a guaranteed installment agreement? The eligibility rules are pretty straightforward:
- Your tax debt is $10,000 or less, including penalties and interest combined.
- You’re up-to-date on your tax filings.
- You’ve never had a previous agreement with the IRS and failed to adhere to it.
- You’re willing to pay the whole bill and aren’t trying to negotiate a lower amount.
You must also be capable of making the payment within 36 months – less, if the statute of limitations on the collection of the debt is about to expire. Once you’re approved for the installment agreement, you’ll make fixed monthly payments until your tax debt is cleared.
Keep in mind, that there are some drawbacks: Interest and penalties continue to accrue against the unpaid balance until it is paid off. The longer you take to pay the debt, the more you’ll end up paying overall. However, a guaranteed installment agreement can take a lot of stress off your back when it comes to back taxes – and it’s simple, predictable and doesn’t require extensive financial disclosures to obtain.
If you’re feeling the tax pressure from the IRS, legal guidance can help you better understand your options.