FAQ – IRS Installment Agreements
Does the IRS allow taxpayers to pay tax debts over time?
Generally, yes, the IRS allows taxpayers to pay tax debts over time. The IRS has several different programs involving installment agreements.
Why would I enter into an installment agreement rather than just sending in voluntary payments?
There are a number of reasons to enter into installment agreements rather than making voluntary payments to the IRS. This can include peace of mind knowing that the IRS will not pursue enforced collection actions. The IRS generally cannot levy on your property while an installment agreement is in place.
It may also include avoiding the IRS taking your tax refund.
It may also help to reduce the accrual of penalties and interest. The failure to pay penalty is reduced to 0.2% per month rather than the normal 0.5%.
What are the most common IRS installment agreement programs?
The most limited type of installment agreement is the statutory or guaranteed agreement. This agreement is for smaller balances that will be paid in full in three years. The balance is $10,000 of tax (not including penalties and interest).
The streamlined agreement is a step up from the statutory or guaranteed agreement. With the streamlined agreement, the tax balance has to be $50,000 or less. The full amount of the tax balance has to be paid off in 72 months.
The IRS can also enter into negotiated agreements. These agreements are based on your ability to pay or reasonable collection potential, using the IRS’s terms. The partial pay installment agreement is an example. The partial pay installment agreement provides for monthly payments that when added up, will not satisfy the amount of the unpaid tax debt. These agreements are referred to as partial pay installment agreements as the collection statute for the taxes will generally expire without the full balance having been paid.
Will the IRS agree to a payment plan based on some other interval than a calendar month?
Generally, no. The IRS requires monthly payments.
What if I have a payment plan with the IRS and I miss one or more payments?
The IRS may reflect the missed payment as a default. It may then send you a notice of default and terminate your installment agreement. You can usually head this off by calling the IRS and asking for additional time to pay. The IRS will often reinstate installment agreements after default for a small fee.