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