Installment Agreements

Installment agreements allow taxpayers to pay tax debts to the IRS or state taxing authorities over a scheduled period. There are several factors necessary for the acceptance of an installment agreement.

  • An installment agreement request must identify what the you can afford on a monthly basis (and)
  • Demonstrate that the liability will be paid off in a timely fashion.
  • Different types and amounts of documentation are required depending upon the amount owed and to whom.

For example, the IRS will set up installment agreements over the phone and with no financial forms if the amount owed is under $10,000. If the amount owed is greater, or if there are complex financials associated with a business, expect more documentation and scrutiny. State revenue departments tend to be less flexible and offer fewer options for installment agreements than the IRS.

The IRS and states vary widely in how long they will allow for the payback period and what actions or inactions can result in an rejection of an installment agreement request, or the default of an existing agreement.

Partial Pay Installment Agreement

The IRS has a repayment option called Partial Payment Installment Agreement (PPIA). In essence this allows for a partial payment of a back tax liability, without going through the arduous Offer in Compromise process.

Not everyone will qualify for a PPIA, and even if you do, it may or may not be the best tax resolution strategy for your situation.

Like all agreements with the IRS, a PPIA requires that you complete financial information that will be reviewed and verified. You will also be required to address equity in assets that can be utilized to reduce or fully pay the amount of the outstanding liability.

If you are accepted, you will be subject to a subsequent financial review every two years, which makes it different from an Offer in Compromise. As a result of this review, the amount of the installment payments could increase or the agreement could be terminated, if your financial condition improves.

Because of the complexity of the different payment options with the IRS and state taxing authorities, you will benefit from discussing your situation with a tax resolution professional.

Due the complexity of the PPIA, contact a representative at Larson Financial at 888-902-0778 to assess if this option is best for your unique situation.