An Installment Agreement is an agreement that allows for a tax liability to be paid over time through scheduled periodic payments. The Internal Revenue Service is authorized to enter into an Installment Agreement if it determines that the agreement will facilitate full or partial collection of the liability. At the Taxpayer’s request, the Internal Revenue Service must enter into an Installment Agreement if:
- The aggregate amount of the tax liability does not exceed $10,000 (excluding penalties and interest);
- Within the previous five years, the Taxpayer has not failed to file or pay, nor entered into a prior installment agreement;
- The Taxpayer demonstrates that he is unable to pay the fax in full;
- The Installment Agreement provides for full payment of the liability within three years;
- The Installment Agreement provides for full payment of a liability that is $25,000 or less within five years; and
- The Taxpayer agrees to remain in full compliance with the tax laws and the terms of the agreement for the period the agreement is in place.
The Internal Revenue Service, in determining whether to allow an installment agreement, may require that the Taxpayer complete a Collection Information Statement. The Taxpayer will be required to file all unfiled returns before being permitted to enter into an Installment Agreement. In order for an Installment Agreement to be granted, the income and expense analysis must generally show that the Taxpayer has sufficient disposable income to pay the tax liability in full in a reasonable period.
The Internal Revenue Service may not levy the Taxpayer:
- During the period that a request for an Installment Agreement is pending;
- During the thirty-day period following the rejection of an offer;
- During the period that an Installment Agreement is in effect;
- During the thirty-day period following termination of an Installment Agreement; and
- If such rejection or termination is appealed, during the period the appeal is pending.
The Internal Revenue Service may (but is not required to) withdraw a notice of lien if an Installment Agreement is in effect.