Conditional Installment Agreement

IRS Definition

When a taxpayer is unable to full pay immediately and does not qualify for a streamlined installment agreement, the taxpayer may still qualify for a conditional installment agreement (or a six-year rule agreement). Taxpayers are required to provide financial information in these cases, but are not required to provide substantiation of reasonable expenses. All expenses may be allowed if: the taxpayer establishes that he or she can stay current with all paying and filing requirements, the tax liability, including projected accruals, can be fully paid within six years and within the Collection Statute Expiration Date (CSED), expense amounts are reasonable.

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A conditional installment agreement is an IRS payment plan that takes your full financial situation into consideration.

When setting up this more complicated agreement, the IRS will require you to provide a financial statement listing all your assets (home, cars, bank accounts, etc.), income and expenses. Usually, the IRS will allow you only a certain dollar amount of expenses based on approved financial standards set by the IRS for each expense type (housing, car payment, etc). If you owe more than $50,000, but you can pay the full balance in six years, the IRS may allow expenses over the standards.

For any tax balance of more than $10,000, the IRS will likely file a tax lien. If you can pay your balance to under $50,000 to qualify for a streamlined installment agreement, it’s best to do so, because the IRS typically won’t file a tax lien.

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