When a taxpayer gets qualified to pay the return on monthly basis through Monthly Installment Agreement, The IRS determines the amount to be paid monthly based on the financial ability of Tax payer, this is known as IRS payment plan or Partial Pay Installment Agreement.
For debts of Less than $25,000, IRS does not require prepared financial statement. If the taxpayer owes more than $25,000 then they need to provide a financial statement to IRS, this will help IRS to decide the amount the tax payer can pay on monthly basis.
If your case is properly prepared, the IRS can accept the 60 Month Payment plan. IRS has the right to deduct the payment directly from the taxpayer’s pay, bank account or credit card. This is known as Streamline Agreement.
If the taxpayer cannot submit the financial installments in the specified period, there are three options through which expansion of payment plan can be requested. In some case where tax payers cannot afford a payment plan, Tax Help MD can help you achieve the partial pay installment agreement.
Partial Pay Installment Agreement (PPIA)
PPIA was initiated in 2005; it is the most recent tax debt reduction plan by IRS. It is also known as hybrid plan. This program takes into consideration the amount of time left under the Statute of Limitations applicable to a particular tax debt (typically, the IRS can only attempt to collect for 10 years) and the elements used to calculate an Installment Agreement amount through the Form 433-F Financial Statement.
This partial payment installment agreement program helps to save a lot of money. Offer in Compromise situation can be achieved without giving out too much information to IRS, which is otherwise required in Offer in Compromise application.
This program considers the amount of time left for IRS to collect the back debt of the taxpayer, and allows the taxpayer to reduce the monthly amount to a greater span of time. The only limitation is that this time should be within 10 year Statute of limitation.
Let us help You Understand
Assume that a taxpayer has a debt of $100,000 in the year 2000. The Statuary period to collect this expense is April 15,2011. If the following two conditions are applicable:
- Tax return was timely filed.
- No bankruptcy or Offer in Compromise filing.
Tax Help MD helps you understand IRS payment plan terms and fill out the Form 433-F. The Financial Statement is prepared for the taxpayer, through which it is shown that the tax payer has discretionary income of $400 per month to pay the IRS. There remains only 10 months (as of July 15, 2010) to collect on the debt. In this circumstance, the IRS has the ability to accept a payment of $400 per month for the remaining period (10 months) as full payment on the original debt of $100,000. This allows the taxpayer to settle his or her debt for as little as $4,000.
Obviously every taxpayer’s situation is different and savings will depend on the applicable facts and circumstances.