How Can an Installment Agreement Help Me With Tax Settlement

What is an Installment Agreement?

An Installment Agreement is tax debt settlement program the IRS/ state uses to allow taxpayers with delinquent tax debt the ability to make monthly payments so that he or she may bring current their tax debt. For those who owe the IRS, there is a recently updated Installment Agreement program that makes it a little easier on the taxpayer. It is known as the Fresh Start initiative. The two primary Fresh Start updates are: (1) The repayment period is extended from 60 months to 72 months and (2) the amount owed for which the taxpayer does not have to submit his/her current financial information is now $50,000, up from $25,000.


It is important to remember that typically the IRS/ state won’t accept an Installment Agreement if you have assets that, through liquidation, can satisfy your tax debt. Usually the IRS and/or state won’t go after the family home or car, but vacations homes, RV’s, extra cars, etc. are all assets the IRS/ state will want you to sell to pay off your debt.

In order to qualify for this program, you must be current in all your tax returns. This doesn’t mean you need to be current with the payment, only that you must have filed your returns. If you are self-employed, you will need to be current on your quarterly estimated tax payments and if you have employees, you must be current on payroll deposits.

Once you apply for or are in an Installment Agreement, typically the IRS/ state will not garnish your pay or levy your bank accounts. Garnishments and levies are tools used as an attempt to have you enter a repayment program.

How Much Do I Have To Pay If Back I Use An Installment Agreement

When applying for any Tax Debt Settlement program such as an Installment Agreement, the IRS/ state must allow you to pay for your basic needs, also known as your allowable living expenses, and these include such items as housing, food, utilities, insurance, etc. The remaining income (discretionary income) is what the IRS/ state can claim. If the money you have available to repay the IRS/ state (income minus allowable living expenses) does not allow you to pay the full amount of your tax debt, you will be allowed a tax settlement for less than the full amount owed. You must qualify for a reduced tax settlement, meaning the IRS/ state will review your current financial status and confirm you do not have the ability to pay your back tax debt in full. Also, keep in mind that if your income increases or decreases, both you and the IRS/state have a right to request a different payment amount.

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Which is better - an Installment Agreement or an Offer-In-Compromise

This question comes up often. I can’t answer it completely for you at this time as it depends on your situation. An Offer-In-Compromise is very hard to qualify for and the majority of those who apply for this type of tax resolution are turned down. However, if you do qualify for this program, many times it will be the cheapest way to resolve your back tax debt. The rest of us will have to use the Installment Agreement. You see from the above examples, it is possible to settle your tax debt for less than the full amount owed.

A few things to keep in mind about the Installment Agreement

• If you qualify, you can pay back less than what is owed 
• It is what you are able to pay back per month (income minus Allowable living expenses) that the IRS/ state has a right to. 
• Interest and Penalties will continue to accrue even when you are in the repayment program 
• After submitting your Installment Agreement for approval or while in an Installment Agreement, typically the IRS/ state will not garnish your paycheck or levy your bank account

The article is only a quick overview of how in Installment Agreement can help you with tax settlement. To learn more about the different types of Installment Agreements and what tax resolution program will work best for your specific situation, visit www.TheTaxSettlementGroup.com or call us at 877-801-9166. We are here to help you.