IRS Installment Agreements

Choose the Right Installment Agreement to Pay Off your Federal Tax Debt

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A monthly payment plan is generally the easiest way to pay off any large debt, even a tax liability, and you can indeed make arrangements with the Internal Revenue Service to pay off any taxes you owe this way. The IRS offers four different types of installment agreements, all of them subject to certain rules. Find out which you qualify for so you can tell the IRS what type of payment agreement you'd like to set up.

  

Guaranteed Installment Agreements

The IRS is required to agree to an installment plan if the balance you owe is $10,000 or less as of 2017 and if you meet all of the following criteria:

  • You haven't filed late or paid late in the previous five years.
  • All your tax returns are filed.
  • You'll pay off your balance in 36 months or less.
  • You've had no other installment agreements in the past five years.
  • You agree to file on time and pay on time for future tax years.

The minimum monthly payment the IRS will accept is the total of your balance due including penalties and interest divided by 30. 

The main benefit of a guaranteed installment agreement is that the IRS will not file a federal tax lien against you. Tax liens are reported to the credit bureaus and negatively impact your credit score. The IRS won't ask you to fill out a financial statement (Form 433-F) in an effort to analyze your current financial situation.

 

Streamlined Installment Agreements

If you don't meet the criteria for a guaranteed installment agreement, you might qualify for a streamlined installment agreement instead. Taxpayers can qualify for this type of agreement when the balance owed to the IRS is $50,000 or less as of 2017. The taxpayer must agree to pay off the balance in 72 months or less.

The streamlined installment agreement is part of the IRS' "Fresh Start Program." Before Fresh Start, the IRS would approve streamlined agreements only if the balance owed was $25,000 or less and the taxpayer agreed to pay it in full within 60 months.

As with all other installment agreements, the IRS requires that you file all your tax returns first if any are late, and you must agree to file your tax returns on time and pay your taxes on time in the future.

The main benefit of a streamlined installment agreement is that the IRS will not file a federal tax lien. Furthermore, the IRS will not ask you to complete a financial statement (Form 433-F) in an effort to analyze your current financial situation.

Partial Payment Installment Agreements

If the minimum payments for either the guaranteed or streamlined installment agreement plans don't fit your budget, you might be better off considering a partial payment installment agreement. This is a type of payment plan where the monthly payment is based on what you can actually afford after taking into consideration your essential living expenses.

Unlike guaranteed or streamlined agreements, a partial payment plan can be set up to cover a longer repayment term and the IRS might file a federal tax lien to protect its interests in collecting the debt.

The IRS will ask you to fill out a financial statement (Form 433-F) to report your average income and living expenses for the past three months, and you will also have to provide paystubs and bank statements as supporting documentation. The IRS reevaluates the terms of partial installment agreements every two years to see if you might be able to pay more.

"Non-Streamlined" Installment Agreements

You'll have to negotiate your own installment agreement with the IRS if the balance you owe is over $50,000, if you need a repayment term longer than five years, or if you don't meet any of the criteria for a streamlined or guaranteed installment plan. Such an agreement is negotiated directly with an IRS agent and is then routed to a manager at the IRS for review and approval.

The IRS will likely file a federal tax lien if they haven't already.

This type of agreement is often referred to as a "non-streamlined" agreement because it falls outside the IRS' guidelines for automatic approval of the agreement. The IRS will ask that you provide a financial statement (Form 433-F) so they can analyze the most you can afford to pay each month toward your balance. The IRS will likely ask that you attempt to sell assets, take out a bank loan, or get a home equity loan so you can pay your tax debt without entering into an installment agreement.

Seek the advice of a federally authorized tax professional, such as an enrolled agent, a certified public accountant or a tax attorney if you're unable to pay your tax debt. A professional can talk to the IRS on your behalf and can help you manage the process so it's not so overwhelming. A professional can also help you analyze your current financial situation and tax issues to help you decide which program will best suit your needs. Interest and other fees typically apply. 

IRS Resources You May Need

  • Payment Plans and Installment Agreements - Overview of installment agreements
  • Form 9465 (pdf) - Form used to request an installment agreement.
  • Online Payment Agreement - An application for submitting your installment agreement request online directly on the IRS.gov Web site.
  • Form 433-F (pdf) - A financial statement, also called a Collection Information Statement, used by the IRS to analyze a taxpayer's income, living expenses, and value of assets.