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
Partial Pay Installment Agreement (PPIA)
Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
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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.