Installment Agreements (IA)
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An Installment Agreement is an IRS instrument to allow the taxpayer to pay a currently due tax liability in smaller payments over a period of months/years because the taxpayer is unable to pay the liability in full when due or assessed. There are three types of Installment Agreements as explained below:
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Statutory (Guaranteed) Installment Agreements require the IRS to accept a taxpayer’s application for an IA where the tax owed is $10,000 or less (w/o penalties or interest); taxpayer attests he has filed and paid his taxes for the five preceding tax years and has not entered into an IA during those five years; taxpayer asserts he is unable to pay the current year tax liability in full immediately but will agree to pay the entire tax liability within the three years term of the IA; and the taxpayer agrees to file all required returns and pay all taxes due during the term of the Installment Agreement.
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Streamlined Processing of Installment Agreements – The IRS is currently running a test program scheduled to end in September, 2018. Under this test, the following guidelines are in place and will be evaluated to determine whether the new “streamlined processing” will become a permanent part of the Internal Revenue Code.
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For individuals with an assessed balance of tax, penalties and interest of $50,000 or less:
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Taxpayer can secure an installment agreement with up to 72 months to pay.
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No Collection of Information statement required by IRS proving taxpayer’s ability to pay if taxpayer agrees to direct debit or payroll deduction for payments.
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Direct Debit or payroll deduction is preferred or IRS will make a Notice of Federal Tax Lien determination if amount is over $25,000.
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For individuals with assessed balances between $50,001 and $100,000:
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Taxpayer can secure an installment agreement with up to 84 months to pay.
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No Collection of Information statement required by IRS proving taxpayer’s ability to pay if taxpayer agrees to direct debit or payroll deduction for payments.
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The IRS makes Notice of Federal Tax Lien determination to value taxpayer’s assets.
Partial Pay Installment Agreements are an option when the taxpayer may have assets whose value exceed the assessed tax liability, but for various reasons the sale of the assets may be difficult to achieve.
Additionally, if the IRS during their review of the taxpayer’s financials finds that sufficient funds will become available in the near future, the IRS can negotiate a smaller monthly payment than would normally be required, then extend the Collection Status End Date (for the 10-year collection period) to the point where the taxpayer will gain the additional funds to pay off the liability.