How Do You Qualify for a New York State Installment Payment Agreement?

Do you owe taxes to New York State but cannot afford to pay it off at once? You may qualify for a New York State Installment Payment Agreement (IPA). An IPA allows you to pay off your total tax liability in monthly installments, as opposed to paying off your entire liability at once. However, it is not automatic. You must apply and qualify plus comply with the terms of the agreement until you have paid everything you owe. An IPA is not the best solution for everyone, but it may be the answer to your tax problems.

What are the requirements for a New York State Installment Payment Agreement?

To qualify for an installment payment agreement, you must complete a financial statement and supply other information to substantiate your present financial condition and your present inability to make a full payment. Also, you must file returns and pay all future taxes as they become due. If you do not pay any new liabilities on time, you will be in default under the agreement.

What is the application process?

You can apply either by calling, completing an online application, or submitting a statement of financial condition form (Form DTF-5 New York State Department of Taxation and Finance: Statement of Financial Condition and Other Information). On Form DTF-5, the taxpayer must include information about existing assets and liabilities, sources of income, and all bank accounts and other financial institutions with which the taxpayer does business. The Department may review three years of federal tax returns along with bank statements for the preceding year to assess and verify the taxpayer’s financial resources. In some cases, they may request additional information.

As part of the application process, you can request a specific monthly payment amount and/or time period in which to pay off the liability. The Department of Taxation does not publish information about the typical or maximum length of a payment plan. However, as a general rule, the longer the pay-out time, the more rigorous the review of the IPA request.

Once you and the Tax Department agree on the amount of the liability, the length of the payment plan, and the monthly payments, you sign the agreement. You may need to make a down payment and set up automatic debit payments from a bank account, but it is possible to get an IPA without these in certain circumstances.

When should you consider other options besides an Installment Payment Agreement?

Interest and penalties continue to accrue over the life of the payment plan. As a result, it is often in the best interest of the taxpayer to consider loans from other sources before pursuing an Installment Payment Agreement. An IPA is useful for taxpayers who have adequate income, but who do not have sufficient equity to support a loan. If you cannot afford to pay even with an IPA, an Offer in Compromise may be a better option for you.

If you owe back taxes, contact us for a consultation to discuss the best way to resolve your tax matter.