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IRS PAYMENT PLANS (INSTALLMENT AGREEMENTS)

What is a Installment Agreement?

Whether you call it a payment agreement,  installment agreement , payment option or a payment plan, the idea is the same — you make payments on the tax you owe. Installment agreements allow for the full payment of the tax debt in smaller, more manageable amounts.

Understanding Installment Agreements

Under a Installment Agreement the IRS will not only collect all the tax but also the penalties and interest (including the interest which accrues while you are paying on the installment agreement) and in most cases a federal tax lien will either be filed or remain filed until the debt is fully paid.

How the IRS Determines How Much you Pay Each Month

If your case is with ACS the IRS uses Form 433F if you are an individual or Form 433A if your case is assigned to a Revenue Officer (Form 433B if you own a corporation, partnership or a limited liability company).  They will subtract your expenses they consider reasonable using   “National Standards”  as a guide (found on irs.gov) from your income and this will be the amount of your installment agreement.  

Who Qualifies for an Installment Agreement?

Most people and businesses will qualify for an installment agreement if they are current with their filings (1040s for individuals) and have made their most recent required estimated federal tax requirements (if self-employed) and if they have not been on a prior installment agreement (the IRS views installment agreements as a privilege-not a right).

Types of Installment Agreements:

IRS Partial Payment Installment Agreement:  This payment plan is available to taxpayers who do not have the cash flow to support full payment of their tax liability over the remaining life of the collection statute (10 years from the date the tax was assessed).  If the taxpayer can only afford $200 a month on a $50,000 tax liability with three years remaining on the statue the IRS will not receive full payment and thus the agreement is a Partial Payment Installment Agreement.  These agreements came out a few years ago and require more time to get excepted than does a typical full-pay installment agreement for the obvious reasons.  Equity in assets must be addressed prior to the agreement and the agreements are reviewed every two years.

Streamlined Installment Agreement:  If you owe less than $25,000 and have all returns filed the IRS allows full payment over 5 years or 60 months.  Under this installment agreement you do not have to disclose the IRS with financial information.  Like the typical installment agreement penalty and interest continue to accrue while you are making payments.

In-Business Express Trust Fund Installment Agreement:  If the business owes less than $10,000 and is current with its filings and federal tax deposits it will qualify for a 24 month (or prior to the ten-year statutory period for collection, whichever is earlier).

Guaranteed Installment Agreement:  If the personal tax liability is under $10,000 and all returns are filed the IRS will accept a payment plan without the disclosure of financial information if the tax will be paid 36 months or prior to the ten-year statutory period for collection, whichever is earlier.





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