If you owe taxes on crypto and cannot write a check for the full amount, an installment agreement lets you pay over time while stopping aggressive IRS collection. Here is what crypto tax installment agreement involves.
Types of Installment Agreements
The IRS offers several types. A guaranteed installment agreement is available if you owe $10,000 or less and can pay within 3 years. A streamlined agreement covers balances up to $50,000 with up to 72 months to pay. A non-streamlined agreement is available for larger balances but requires detailed financial disclosure. A partial-pay installment agreement allows payments that will not fully satisfy the debt before the collection statute expires.
How Payments Are Calculated
For streamlined agreements, the monthly payment is simply your balance divided by the number of months remaining. For non-streamlined agreements, the IRS calculates your disposable income by subtracting allowable expenses from your gross income. Your minimum payment is based on that disposable income calculation.
Interest and Penalties Continue
An installment agreement stops levies and liens, but interest and the failure-to-pay penalty continue to accrue on the unpaid balance. The failure-to-pay penalty rate drops from 0.5% to 0.25% per month while an installment agreement is in effect, but the balance still grows. This is why paying as quickly as possible - or pursuing an OIC if you qualify - is generally better.
Crypto-Specific Considerations
If you hold cryptocurrency while on an installment agreement, those holdings are considered assets. If your crypto increases significantly in value, the IRS could argue that you have the ability to pay more and modify the agreement terms. Conversely, if your crypto decreases, you may be able to renegotiate.
Frequently Asked Questions
How do I set up a crypto tax payment plan?
For balances under $50,000, apply online at IRS.gov, by phone, or by mailing Form 9465. For larger balances, submit Form 9465 with Form 433-A providing detailed financial information.
How much will my monthly payment be?
For streamlined agreements, divide your balance by the number of months remaining up to 72. For non-streamlined agreements, the IRS calculates your payment based on disposable income after allowable expenses.
Does interest stop with a payment plan?
No. Interest and the failure-to-pay penalty continue to accrue on the unpaid balance during an installment agreement. The penalty rate drops from 0.5% to 0.25% per month while the agreement is active.
Talk to a Crypto Tax Attorney
If you are dealing with crypto tax installment agreement, you do not have to figure this out alone. Contact the Law Offices of Darrin T. Mish, P.A. at (813) 229-7100 for a free consultation. 32 years of IRS resolution experience. Over $100 million in tax debt resolved.