Sam Brotman, JD, LLM, MBA December 16, 2013 4 min read

Streamlined Installment Agreement

The streamlined installment agreement helps taxpayers catch up on their back taxes. The streamlined installment agreement is part of the Fresh Start initiative. The initiative offers benefits to the taxpayer. The benefits are specific to the maximum dollar criteria and the maximum term for the agreement. For example, “the maximum dollar criteria for streamlined installment agreements has been raised from $25,000 to $50,000 and the maximum term has been raised from 60 months to 72 months” (IRS.gov, “Fresh Start Installment Agreements,” 8/20/2013).

In addition, the streamlined installment agreement is divided into two categories[1] and both are based upon the balance due. To qualify under either category, you must meet the minimum requirements. Otherwise, it will be difficult to enter into an agreement that aligns with IRS standards. For example, to qualify for the first category, you must not owe more than the $25,000. “If you owe more than $25,000, you may pay down the liability before entering into the agreement in order to qualify” (IRS.gov, “Fresh Start Installment Agreements,” 8/20/2013). Under the first category, the debt must be paid within 72 months and prior to the Collection Statute Expiration Date (CSED). Individuals owing tax will be able to use the streamlined agreement under this category. Exceptions apply.

To qualify under the second category, the balance due must be within a range of $25,001 and $50,000. Similar to the first category, if you owe more than $50,000, then you will need to pay down the balance before initiating the agreement. The debt under this category must also be paid within 72 hours. All taxpayers must be compliant with both filing and payment requirements.

Under each category, taxpayers must file Form 1040 and may be subject to the Trust Fund Recovery penalty. Defunct businesses under each category must also submit one or more of the following forms: 940, 941, or 943. An operating business with income tax liabilities must file Form 1120 under the first category. Lastly, under category two, taxpayers must enroll in a Direct Direct Installment Agreement.[2]

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[1] The first category is $25,000 or less. The second category is $25,001 to $50,000.

[2] For more information about this type of agreement, visit the IRS website here: http://www.irs.gov/irm/part5/irm_05-014-010.html.

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Sam Brotman, JD, LLM, MBA

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Brotman Law

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