Installment Agreement Tax Settlement

An Installment Agreement allows you to pay your full debt in smaller, more manageable amounts. Installment Agreements generally require equal monthly payments. The amount of your installment payments and the number you make will be based on the amount that you owe and your ability to pay that amount within the time that the IRS can legally collect payment from you. There are various types of installment agreements:

• Streamlined Installment Agreement (SIA)

  A taxpayer may enter into an SIA when they have a balance due of less than $50,000 and can fully pay their debt within 72 months or prior to the Collection Statute Expiration Date, whichever is earlier. This type of agreement generally does not require a financial statement, but a limited amount of financial information may be required in the application process. Taxpayers who qualify for an SIA must be compliant with all filing and payment requirements, and those with a balance of $25,001 to $50,000 must also enroll in a Direct Debit Installment Agreement.

• Conditional Expense IA

  This type of agreement can be used when a taxpayer has expenses that fall outside the scope of what the IRS typically allows, but is still able to fully pay the liability plus projected accruals within five years. If the liability plus accruals can be paid within five years, the IRS may deem it appropriate to allow the taxpayer the conditional expenses. If the taxpayer cannot pay within five years, the IRS may still deem it appropriate to allow the taxpayer the conditional expenses for up to one year in order to modify or eliminate the expense. A financial statement is required for this type of agreement so that the taxpayer can provide proof of their conditional expenses.

• Stair-Step IA

  A stair-step installment agreement is a 60 month payment arrangement whereby the taxpayer makes a lower fixed payment for a period of 12 months before stepping up to a higher payment for the remaining 48 months of the agreement. The taxpayer is required to fully pay the tax debt within this 60 month period. Stair-step installment agreements are typically used when the taxpayer is close to paying off an expense such as a car loan, mortgage, medical bill, student loan, etc.

• Traditional Installment Agreement

  The Traditional Installment Agreement is a full pay arrangement requiring the taxpayer to pay as much as possible, as dictated by the facts and circumstances represented in the financial statements of the taxpayer.

• Partial Pay Installment Agreement (PPIA)

  Implemented in 2005, the Partial Payment Installment Agreement (PPIA) allows the IRS to enter into installment agreements that result in only partial payment of the tax liability. Prior to the enactment of this legislation, taxpayers could only enter into an agreement with the IRS if it resulted in full payment of the liability. This type of agreement can offer savings comparable to the OIC; however, the taxpayer must remain on the installment agreement until the collection statute expires. Taxpayers who are being considered for a PPIA must provide complete and accurate financial information that will be reviewed and verified. Taxpayers will also be required to address equity in assets that can be utilized to reduce or fully pay the amount of the outstanding liability. In addition, taxpayers granted PPIA's will be subject to a subsequent financial review every two years. As a result of this review, the amount of the installment payments could increase or the agreement could be terminated if the taxpayer's financial condition improves.