Installment (Payment) Agreements

Receiving a tax bill from the IRS can be daunting. Acting quickly helps prevent enforcement actions. While paying the full amount before the due date is ideal, many taxpayers face financial constraints, especially during challenging times. Fortunately, the IRS offers alternatives, such as setting up an installment agreement to help manage tax debts.  Almost every state tax agency also offers installment agreements, but I will focus here on the IRS process.

An IRS installment agreement is a payment plan. It lets taxpayers pay their federal tax bill in monthly amounts. Taxpayers can arrange installment agreements online, by phone, by mail, or in person, and they offer both short-term and long-term options.

The short-term installment agreement allows taxpayers to settle their tax debt within 180 days. The long-term option extends the repayment period to up to 6 years for those who need more time. Choosing the right plan depends on the amount owed and the monthly payment you can afford. It’s important to note that interest and late payment penalties continue to accrue during the repayment period.

The IRS has two specialized installment agreements: the recently announced (2025) “simple installment agreement” and the “streamlined installment agreement.” Both require that the total liability, which includes tax, penalties, and interest, be less than $50,000. The simple installment agreement allows payments to be made over a longer period, up to 10 years. See my blog for more information on this newest payment plan.

Most taxpayers qualify for a short-term IRS installment agreement. They must owe less than $100,000 in combined tax, penalties, and interest. They have filed all tax returns for the past six years and can repay within 180 days. Those owing $50,000 or less may qualify for a long-term plan if they need more than 180 days to settle their tax bill.

If you’re ineligible to set up a plan online, you can still apply by mail or phone. Reasons for ineligibility may include nearing the expiration of the 10-year collection statute on a tax year with a balance due.

Installment agreements can be either full-pay or partial-pay. Full pay agreements require taxpayers to pay all outstanding balances before the 10-year statute expires.

For larger liabilities or partial payment agreements, the IRS typically requires a completed Collection Information Statement, such as Form 433-A, 433-F, or 433-B for businesses. These forms detail income, expenses, assets, and liabilities to determine the taxpayer’s expected monthly payment.

While there’s more to know about IRS installment agreements, it’s advisable to discuss your specific financial situation with a tax resolution specialist who is an EA (enrolled agent) or CPA during a consultation. Ultimately, IRS payment plans offer a viable solution for many taxpayers, and seeking assistance from a tax resolution specialist familiar with the process can often lead to better outcomes.