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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • IRS Installment Agreements and Non-Collectible Status Arrangements

    time fliesA large majority of people who owe the IRS  don’t make good candidates for the IRS  Offer in Compromise program.  That large majority end up in some form of payment arrangement, non-collectible status or bankruptcy.  It is often the case that one of one or more non-offer in compromise options actually makes more sense given the situation and provide the taxpayer the best way to resolve the IRS problem and move on.


    There are four kinds of IRS Installment agreements available but we also include IRS non-collectible status as a type of installment agreement as well:

    Guaranteed installment agreements

    If the debt is less than $10,000 and can be paid within 3 years, the IRS will agree to a payment plan.  Visit the IRS website at and fill out the online form.

    Streamlined installment agreements

    The IRS took congress’ idea and in an effort to streamline collections even further, it expanded the amount to $50,000 in “assessed” balance.  If the assessed balance is $50,000 or less the IRS will agree to a payment plan of the entire balance over 60 months.  It will stretch it to 72 months if you allow them to take the payment electronically from your bank account each month.  The IRS also chooses not to record any tax lien notice if you end up in the 72-month plan.

    The assessed balance is the total amount of tax, penalty, and interest placed on the books when the return was originally entered into the system.  You may have an assessed balance of $45,000 and a current balance of $55,000.  The ability to take advantage of this program and avoid the lien notice filing is dependent on knowing the assessed balance, paying the assessed balance to $50,000 or less and being able to pay the entire debt over 72 months from a bank account.

    If you feel you can afford this payment amount, you can set this plan up without help.  Contact the IRS and make sure the assessed balance is below $50,000.  If it isn’t, verify how much would need to be paid to get the assessed balance below that threshold.  Make sure you tell the IRS that you are trying to arrange a “streamlined” agreement and avoid the lien notice filing.  You can also visit the IRS website and apply online if your debt is clearly below $50,000.

    Discretionary installment agreements

    If you owe more than $50,000, or owe less than $50,000 but can’t afford to pay it within 72 months, you will negotiate directly with IRS collections.  These types of plans are discretionary with the IRS and they require that you provide a full financial history often in the form of a “433-A” Statement.  What you provide the IRS about your financial life is provided to under penalty of perjury and you will need to be very careful about disclosure.

    This can be done on your own but most people should seek help.  Each bit of information is important including how to value your assets, calculate your income, proving your expenses and any special circumstances you may have.

    The IRS will record tax lien notices in these situations.

    Experienced legal counsel can also compare your eventual payment plan and your overall situation to what it would look like if you used bankruptcy or an offer in compromise instead.

    Partial installment agreements

    The IRS will agree to a payment amount that only pays a portion of the IRS debt before the 10-year statute of limitations period expires.  The IRS will agree to these arrangements in most cases where hardship is clear and a full financial statement is supplied with certain supporting documents.

    The IRS will record tax lien notices in these situations.

    Again, it is possible that an offer in compromise or a bankruptcy will make more sense that a partial pay installment agreement but a complete analysis is required in order to determine this.

    Non-Collectible Status Agreements

    This type of agreement is similar to the partial installment agreement in that if the IRS is convinced that you in a true hardship and can’t afford to pay anything toward the debt, it will agree to a payment plan amount of zero for a short period of time and/or until your situation improves.

    Full financial disclosure is required and the IRS will record a lien notice.

    A Word about Un-Filed Returns and New Liabilities

    Any “required” and missing tax returns will have to be filed and in the system or the IRS won’t agree to any collection resolution and will continue collection activity.  (barring true hardship which results in a short hold to allow time to finish the returns, or the IRS hasn’t issued final notices of intent to levy)

    When an agreement is entered into, any missing returns or new debts in the future will default the agreement.