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IRS Installment Agreements

IRS Installment Agreement
An IRS Installment Agreement is a payment plan with the IRS, where the tax payer agrees to pay the total outstanding debt in full by making monthly payments for a set number of years.

Although there are several variations, the 4 most common types of IRS Installment Agreements are the Guaranteed Installment Agreement, Streamlined Installment Agreement, Financially Verified Installment Agreement, and Partial Pay Installment Agreement.

Guaranteed Installment Agreement
As the name implies, the Guaranteed Installment Agreement is essentially guaranteed if you meet the necessary requirements. To qualify, you must owe the IRS under $10,000, have filed & paid all of your tax returns for the previous 5 years, and you must be financially able to pay off your current tax debt in full within 3 years or less. If this sounds like your situation, then most likely you do not need a tax professional’s help in setting it up.

Streamlined Installment Agreement
If you owe the IRS more than $10,000, but less than $25,000 you may qualify what is called a Streamlined Installment Agreement.

This installment agreement requires the following:

  • You must owe the IRS $25,000 or less
  • Be financially able to pay off your tax debt in full (plus all interest & penalties) in 5 years or less
  • Show that you have filed and paid all of your tax returns for the previous 5 years

    A qualified tax professional should be able to set up a Streamlined Installment Agreement for you fairly quickly, if the above requirements apply to your current situation.

    Financially Verified Installment Agreement
    Now, if you owe the IRS more than $25,000 or otherwise do not qualify for any of the above Installment agreements, then you will most likely need to try for a Financially Verified Installment Agreement. These are harder to secure than the above agreements, and they require you to submit detailed financial statements proving your current financial situation (Collection Information statement). You will also need to provide financial records including bank statements for at least 3 months.

    If you owe over $100,000 to the IRS, then expect a much longer wait time to get approval on your payment plan. Your case will be held with the IRS “Large Dollar Unit” and their wait times are much, much longer.

    Partial Pay Installment Agreement
    In all of the above IRS Installment Agreements, the taxpayer is expected to pay off the entire tax debt in full. However, if you owe the IRS back taxes, and can not make the required monthly payments, then you might qualify for what’s called a Partial Payment Installment Agreement or (PPIA). This new payment option became possible with the passage of the American Jobs Creation Act of 2004 signed into law on October 22, 2004. The new legislation includes language amending Internal Revenue Code 6159 to allow the IRS to enter into installment agreements that result in full or partial payment of the tax liability. This is a special type of IRS Installment Agreement where the IRS has agreed that you as the taxpayer can not “in your current situation” afford to make large enough monthly payments to pay off the entire IRS debt in full. So, as a concession, the IRS will agree to take what they can get from you on a monthly basis. However, one of the stipulations of this agreement, is that the IRS can and will check up on you from time to time to see if your “current situation” has improved, and you can now afford to increase your monthly payments.

    If you are currently faced with an IRS Audit, or owe the IRS back taxes, you should think very strongly about consulting with a tax professional today. To speak directly with a tax advisor at our firm, call us at (888) 918-8121. The call is free, the consultation is free, and you are under no obligation to hire us.

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