Over the last year, the IRS has recognized the financial burden many taxpayers are facing due to the COVID-19 pandemic. The agency modified a number of ways it collects back taxes, including the introduction of installment agreements that don’t require a financial statement for some taxpayers who owe the IRS up to $250,000.
Under streamlined installment agreements (a type of long-term payment plan for a taxpayer’s full tax debt), the IRS does not verify your assets, income, expenses, or other financial information, nor is a lien filed (in most cases). Your balance (of no more than $50,000) must be settled within 72 months or the collection statute expiration date, whichever is sooner, to qualify.
Beginning in March 2020, taxpayers facing debt between $50,001 and $250,000 are eligible for installment agreements without financial verification! This COVID-related expansion of installment agreements considers qualifying taxpayers eligible for slightly different, yet still fairly hands-off, agreements referred to as nonstreamlined installment agreements, or NSIA—as long as “their case is not yet assigned to a revenue officer.” This replaces the 84-month installment agreement for tax debts between $50,000 and $100,000.
The biggest differences between a streamlined and the new nonstreamlined agreement are the length of the agreement and whether or not direct debit payments are required. A streamlined agreement must be paid over 72 months, while an NSIA can be paid over the statute of limitations on collections, up to 120 months. There is no direct debit requirement with a nonstreamlined agreement.
Taxpayers who do not qualify for a streamlined or new nonstreamlined installment agreement will be required to submit a Collection Information Statement and supporting documentation in order to establish an agreement. The agreement must reflect the taxpayer’s ability to pay monthly throughout the term of the agreement.
The Pros and Cons of an IRS NSIA
This program has the potential to impact how many people resolve their back taxes. There are numerous benefits, beginning with the time and money savings that come with no longer needing to prepare and submit financial statements. Additionally, because the taxpayer does not need to share any information about income or assets with the IRS, they won’t be required to liquidate those assets to settle or pay down their tax debt with a lump sum. Because of the IRS’s COVID-related relief programs, in situations where all of the tax debt in question (up to $250,000) is from the 2019 tax year (due on the extended deadline of July 15, 2020) a lien will not be filed.
There are also downsides to a nonstreamlined installment agreement. If the tax debt is from years other than—or in addition to—2019, the IRS will file a lien on debts greater than $50,000. It must also be noted that without sharing your financial information with the IRS, you can’t qualify for other resolution programs that allow you to pay less than what you owe, such as an offer in compromise or partial pay installment agreement.
Whether or not the pros outweigh the cons depends on your unique circumstances. Turn to the experienced tax professionals at East Coast Tax Consulting Group to determine if an NSIA is right for you.