Basics of Installment Agreements

There are three general types of Installment Agreements that the IRS will accept, depending on circumstances.  They are:

STREAMLINED INSTALLMENT AGREEMENT: If the taxpayer owes less than $25,000, an installment agreement is not as difficult to obtain.  The IRS has a streamlined procedure where the taxpayer can enter into an Installment Agreement and pay the past due taxes in no more than 5 years, depending on how much their income is.

FULL PAY INSTALLMENT AGREEMENT: If the person owes over $25,000, but is able to pay the obligation in full within 5 years, they may be able to qualify for an Installment Agreement.  In this circumstance, they must provide very detailed financial information, together with proof of necessary living expenses.  The IRS will only allow them a relatively modest amount for living expenses.  These expenses are set by National Standards.  The IRS will expect that the taxpayer live very frugally and pay all of what they consider to be excess income towards the tax liability.

PARTIAL PAY INSTALLMENT AGREEMENT (PPIA): If the taxpayer simply doesn’t have enough excess income to pay the tax liability within 5 years, then they may qualify for a PPIA.  This is the most difficult Installment Agreement to obtain.  The IRS grants these Installment Agreements with reluctance.  They are probably not going to be paid in full and as such, they will scrutinize the taxpayers and their finances very carefully.  However, if a person really can’t afford to make significant payments to the IRS, then they may qualify to pay only a small portion of the amount of the taxes that they owe.

In order to obtain the very best Installment Agreement possible a person should have the help of a qualified Tax Attorney to assist them in preparation of their Installment Agreement.  For more information about Installment Agreements, please visit our website at:

http://www.martellelaw.org/irs-installment-agreement/

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