Owe back taxes to the IRS and can't afford to pay the amount in full? Many people believe that the IRS will not work with taxpayers and that the only way you can get out of tax debt is to pay your debt in full. However, under the right conditions the IRS will allow you to set up an installment plan and make monthly payments on your debt.
An IRS installment agreement is a payment plan that allows taxpayers to pay off their tax debt over time in manageable monthly amounts. It's a formal arrangement between you and the IRS to settle tax debts when you can't pay the full amount owed immediately or all at once.
To be eligible for an IRS payment plan, you will have to meet the following criteria:
If you meet these requirements, you will be able to ask the IRS to set up an installment plan for you to pay off your delinquent tax debt and any associated penalties.
>>Click Here to Read 4 Reasons You Should Set Up a Payment Plan
Our tax professionals can coach you on setting up a payment plan with the IRS. Watch Top Tax Defenders Director of Operations Priya Mishra explain more about our process.
As you might expect, you will have to pay some fees to set up an installment plan with the IRS, similar to paying fees when setting up any type of loan or payment plan. Here are some of the costs you might need to pay:
>>Click Here to Read About Advantages & Disadvantages of Payment Plans
The IRS offers two main types of installment agreements: guaranteed installment agreements and streamlined installment agreements. Here's an overview of each:
In summary, guaranteed installment agreements have specific eligibility criteria and are automatically approved if the taxpayer meets those criteria. Streamlined installment agreements have slightly higher debt limits but require IRS approval, although they typically involve less paperwork and financial disclosure compared to other installment agreement options. If neither of these options work for you, there are a few other IRS installment plans and agreement options that could be a better fit for your situation.
>>Click Here to Learn About Different Types of IRS Installment Plans
Setting up a payment plan with the IRS means a stop to any collection phone calls, mailings, or visits from IRS revenue officers. If you make timely payments, you will not be in danger of receiving a levy or lien on your personal property. However, it is important to note that you will be paying interest on the balance of your tax debt, and the IRS will continue to assess penalties until your debt is paid in full.
To stay on your payment plan with the IRS, you must file your taxes in compliance with federal tax regulations in all future years.
>>Click Here to Learn More About How to Set Up a Payment Plan
If you are struggling with tax debt, and need to set up a payment plan with the IRS to pay off your debt, you need the experienced team at Top Tax Defenders on your side. Top Tax Defenders has 27 years of experience dealing with the IRS, and knows how to get you set up with an installment plan that you can afford.
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An IRS installment agreement is a formal payment plan that lets you pay off tax debt in monthly installments instead of all at once. It is an arrangement between you and the IRS that stops collection calls, mailings, and revenue officer visits as long as you make payments on time and stay current on future tax filings.
To qualify for a standard IRS installment agreement, you must have filed all required tax returns and owe $50,000 or less in combined tax, penalties, and interest. If you owe more than $50,000, you may still qualify but will likely need to provide additional financial documentation and the terms may differ.
The IRS offers two main types. A guaranteed installment agreement is automatically approved for taxpayers who owe $10,000 or less, have filed on time for the past five years, and have not had a prior installment agreement or Offer in Compromise in the last five years. A streamlined installment agreement is available for those who owe $50,000 or less and can pay the balance within six years.
A guaranteed installment agreement is automatically approved by the IRS, no financial disclosure required, if you owe $10,000 or less, have filed your returns on time for the past five years, have not had an installment agreement or Offer in Compromise in the prior five years, and agree to pay the full balance within three years.
A streamlined installment agreement is available to taxpayers who owe $50,000 or less in combined tax, penalties, and interest. It requires IRS approval but typically involves minimal financial disclosure. You can apply online, by phone, or using Form 9465. You must agree to pay the full balance within six years or before the collection statute expires, whichever comes first.
The IRS charges a setup fee ranging from $31 to $130 for individuals, depending on your payment method and plan length. Low-income taxpayers may qualify for a reduced fee. Interest continues to accrue on the unpaid balance at the federal short-term rate plus 3%, compounded daily. A failure-to-pay penalty of 0.5% per month also applies, though it is reduced to 0.25% per month while an installment agreement is active.
Yes. Once an installment agreement is in place and payments are made on time, the IRS will stop collection calls, letters, and revenue officer visits. You will not be at risk of a levy or lien on your property as long as you remain compliant. However, interest and penalties continue to accrue on the unpaid balance until it is paid in full.
Yes. Interest accrues daily at the federal short-term rate plus 3% until the balance is paid in full. The failure-to-pay penalty continues at a reduced rate of 0.25% per month while your installment agreement is active, down from the standard rate of up to 1% per month. Paying down the balance faster reduces the total interest and penalties you will owe.
Missing a payment can put your installment agreement in default. The IRS may then reinstate collection activity, including levies and garnishments. You can request to reinstate a defaulted agreement, but the IRS may charge a $10 restructuring fee and require updated financial information. Staying current on payments, and on future tax filings, is essential to keeping the agreement in good standing.
Yes, but the process is more involved. You will need to submit a Collection Information Statement providing detailed financial disclosures about your income, expenses, and assets. The IRS uses this information to determine an acceptable monthly payment amount. A tax professional can help you prepare this documentation and negotiate terms that work within your actual budget.
A payment plan requires you to pay the full tax debt, including interest and penalties, over time in monthly installments. An Offer in Compromise allows you to settle for less than the full amount owed if you meet strict eligibility criteria. A payment plan is easier to qualify for; an Offer in Compromise requires proving that full payment would cause financial hardship or is uncollectible.
Simple cases with balances under $10,000 can often be handled directly through the IRS website. For larger balances, complex situations, or if you want to negotiate the most favorable monthly payment, a tax professional adds real value. They can identify the right agreement type for your situation, ensure all filings are current before applying, and negotiate terms that protect you from future enforcement.
