In 2005, the Internal Revenue Service instituted a partial payment installment agreement. The intent of this IRS Installment Agreement is to make it easier for individuals to settle their debt with the agency. It has become a more common way to remove IRS debt than the more difficult to obtain “Offer in Compromise.”
Who Qualifies For An IRS Installment Payment?
Anyone who owes the IRS money theoretically qualifies for an IRS Installment Payment. This does not mean he or she will be allowed to pay their debt using this method. Before applying for a payment plan with the IRS, he or she must be current in the filing of their income taxes. Beyond filling in the correct form and supplying the desired data, the applicant has little say over whether the IRS will accept their request. The IRS can and does alternative means to obtain the monies owed them. These include levies and liens.
The Process of Applying For An IRS Installment Agreement
The process of applying for an IRS Partial Payment Installment Agreement is simple, yet complex. The individual must use the Partial Payment Agreement Form to provide
- Basic information on name, location, and the usual geographic data
- The required information on finances
Next, he or she must attach a minimum of three months data verifying the financial statements as well as a letter outlining your request. Furthermore, the person needs to state whatever specific sum or sums he or she can disburse towards the IRS for the time period provided.
How To Calculate The Amount
The IRS has no exact formula for deciding what they want. They do consider such factors as
- What you owe,
- What you make and
- The relative size of the entire debt
The individual needs to consider the following factors when stating payment capability.
- The outstanding balance of what you owe
- Any statute of limitations in effect or remaining
- Factors concerning any possible collection potential
Do not forget, the IRS will add interest and other costs.
The Options
There are several options to an IRS Installment Agreement. Someone can elect to follow any of them
- Pay off the debt in its entirety
- Put it on a credit card
- Request a Credit in Compromise instead
- Consider being labeled Currently Not Collectible
Consulting A Taxation Law Attorney
If you decide to request an IRS Installment Agreement, it is a good idea to obtain all the facts. Talk to a taxation lawyer. He or she will be able to inform you as your options and whether this is the route to take.
