IRS Installment Agreement

The IRS provides taxpayers different options to eliminate their tax debt – an installment agreement being one of them. An installment agreement is the simplest and most widely used way to arrange a monthly payment plan with the IRS. These monthly payments, which include penalties and interests, are made until the full tax debt is paid off.

How To Qualify For An Installment Agreement

In recent new adopted rules, the IRS has made it quite simpler for individuals to be able to qualify for an installment agreement. In the past, if you owed $25,000 or less in combined back taxes, penalties and interest; you were able to qualify without the need to provide your financial information and you had a timeline of 60 months to pay back the owed taxes. Now that threshold has been raised to $50,000 with a 72 month timeline to pay the money back. If you owe more than $50,000 in back taxes, you will have to communicate and negotiate with the IRS to obtain this agreement and you will also have to provide your financial information so they can see what your income and assets are. If you owe $50,000 or more, consider seeking out the help of a tax attorney to help prepare documents (like Form 433-F) and to negotiate with the IRS for you.

It is important that you are in compliance with the IRS, meaning:

  • Individuals – must have all required tax returns filed
  • Self Employed Individuals – must be current on quarterly tax payments for the current year
  • Business Owners with Employees – must be current on payroll tax deposits and Form 941 filing

Applying and Understanding Your Installment Agreement

There are different ways to go about applying for an Installment Agreement, but before you apply you must determine which type of installment agreement suits your specific situation best.

  1. Guaranteed Installment Agreement
  2. Streamlined Installment Agreement
  3. Partial Payment Installment Agreement
  4. “Non-Streamlined” Installment Agreement

*Speak with a Tax Attorney to discuss the difference between agreements.

You must also determine how much you will be able to pay every month – it is highly encouraged that you pay as much as possible to reduce the interest and penalties attached to the agreement. Once you have chosen which installment agreement to pursue, you have different options on how to apply. If you owe $50,000 or less to the IRS, you have the ability to apply online, by phone or by completing and mailing out Form 9465 (Installment Agreement Request). If you owe more than $50,000 seek the help of a tax attorney.

Next you must choose your method of payment:

  • Money Orders
  • Personal or business checks
  • Payroll deductions from your employer
  • Direct Debit
  • Online payments

*There is a $52 fee to set up a direct debit agreement with the IRS or $105 fee for standard or payroll deduction agreement with the IRS.

When applying for an installment agreement with the IRS and upon its approval, you must do everything in your power to make sure that you keep your account in good standing. This means that you will pay your full agreed monthly payment on time and if you fail to do so the IRS has grounds to revoke the agreement. If are going through financial hardship and are in danger of defaulting on a payment, contact the IRS immediately to discuss further options.