IRS Installment Agreement | IRS Legal Defense

Not all taxpayers are good candidates for an offer in compromise. Those taxpayers who should not make offers in compromise will then want to discuss installment agreements with their IRS tax defense lawyer.

Types of IRS Installment Agreements

Your IRS tax defense attorney will explain the three different types of IRS Installment Agreements: Streamlined Installment Agreement; Statutory Installment Agreement; and Partial Pay Installment Agreement (PPIA).

Streamlined Processing of Installment Agreements

The streamlined installment agreement is an experimental IRS program for taxpayers (currently set to run through 9-30-2018 (but may be made permanent) who owe $100,000 or less (including interest and penalties) and agree to pay off the IRS debt within 84 months (via direct debit from the taxpayer’s bank account).

If the taxpayer’s tax debt is slightly over 100K, the IRS will allow them to pay down their tax liability (to 100K or below) in order to take advantage of the streamlined installment agreement program.

Small Business Express Installment Agreement

Does not require a financial statement if the small business owes $25,000.00 or less (if the small business owes more than $25,000.00 they have the option of paying down the tax debt (down to 25K) in order to qualify for the business trust fund express installment agreement with the IRS.

The Small Business Express Installment Agreement must be paid within 24 months (or within the IRS statute of limitations, whichever occurs sooner) and the IRS will be paid via a direct debit installment agreement (if the tax debt is between 10K - 25K).

Statutory Installment Agreements

Statutory IRS installment agreements are less common than the IRS’s streamlined installment agreement, because the streamlined agreement is, simply put, more effective and will make sense for more taxpayers just by virtue of it being a tool usable with larger tax debts.

But, statutory installment agreement are for tax liabilities that are $10,000 or less (not including interest and penalties). A tax liability can be less than 10K, yet the taxpayer might owe the IRS 15K because the tax lien has been outstanding for some time. In this situation, the statutory installment agreement would remain an available remedy.

A statutory installment agreement must be paid off in three years or less.

Partial Payment Installment Agreement (PPIA)

When the IRS accepts a lower payment.

Requires IRS Form 433A for PPIAs because the IRS wants to make sure the taxpayer is paying what they can afford. In fact, the IRS will conduct a financial review every two years to see if the taxpayer can afford to increase their payment amount (or maybe the reverse and the taxpayer is designated as “currently non-collectible.”  IRS will also look at whether the taxpayer can draw on equity in any of their assets.

In considering a partial payment installment agreement, the IRS can require the taxpayer to sign a 900 Waiver form which extends the IRS debt collections statute of limitations from 10 years to 15 years.

IRS Installment Agreements are requested using IRS Form 9465 or calling the IRS ACS system and requesting an installment agreement on the phone.

If the taxpayer owes $25,000 or less, only need to complete Part 1 of Form 9465 or the online system.

If the tax debt is between $25,000 and $50,000, only need to complete Parts 1 and 2 or the online system. Tax liabilities over 50K cannot use the online system and must complete Form 433-F as well.

Installment agreement impact the IRS collections process?

When the IRS tax lawyer submits a request for an installment agreement, the IRS will immediately cease its collections efforts.

This will also toll / stop the IRS collections statute of limitations from running - for the period of time the installment agreement until the IRS accepts or rejects the proposed installment agreement. So, if the IRS defense lawyer submits an installment agreement and doesn’t hear back for a month, the statute of limitations is thereby extended for one month + plus a 30 day extension provided by statute.

Using an Installment Agreement Strategically

In a pinch, your IRS debt attorney may recommend applying for an installment agreement, and making small payments. It has the impact of stopping the IRS debt enforced collections process and giving your tax lawyer time to financially plan for how the taxpayer may qualify for an offer in compromise - or even just buy time to figure out what the best approach to minimizing or cutting IRS debt payback obligation might be.

If the taxpayer cannot afford what the IRS would calculate to be the minimum payment amount, then may try a partial payment installment agreement along with Form 433A filled out to show that the taxpayer cannot afford to pay more than what is being offered.  

Appealing an IRS Installment Agreement Denial

If the IRS refuses to approve an installment agreement, what can the taxpayer do? Can the taxpayer appeal to the IRS for the denied installment agreement?

The taxpayer can submit Form 2159 to allow the IRS to deduct installment agreement payments from payroll directly or include a direct debit from the taxpayer’s bank account. Personally, I prefer the IRS tax lawyer to set up a direct debit (rather than using Form 2159) to avoid having to notify the taxpayer’s employer.

Yes, a denied installment agreement can be appealed - but not via a collections due process hearing. Rather the taxpayer would go through the Collections Appeal Program (CAP appeal).

IRS Tax Defense Attorney Resources

The IRS Collections Process - Publication 594

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