An IRS payment plan, also known as an installment agreement, allows you to prevent the IRS from sweeping your bank accounts or garnishing your wages while paying your tax debt in manageable installments. It’s important to note however the IRS may still file a tax lien to protect the governments interests, even if you are enrolled in an Installment Agreement.

Types of IRS Payment Plans

Short-Term Payment Plans

If you can pay your full tax debt within 180 days, a short-term payment plan may be your best option. These plans have no setup fee, though penalties and interest continue to accrue until the balance is paid in full. The monthly payment takes these penalties and interest into account.

Long-Term Payment Plans (Installment Agreements)

For tax debts that require more than 180 days to pay, long-term installment agreements offer an extended payment period. Setup fees range from $22-$178 depending on your application method and payment type. Choosing direct debit payments can significantly reduce your setup fees.

If you owe less than $100,000 and can pay in less than 180 days to pay the full amount including penalties and interest, or if you owe less than $50,000 but need longer than 180 days to pay the full amount including penalties and interest, then you can apply for an IRS payment plan online.

Guarantee Installment Agreement

The IRS will automatically agree to an installment plan if you owe $10,000 or less. The minimum monthly payment the IRS will accept is the total of your balance due, including penalties and interest, divided by 36 months. But if you want to pay more than this to get rid of the debt in less than 36 months, you certainly can.

Streamlined Installment Agreement

Taxpayers can qualify for this type of agreement when the balance owed to the IRS is less than $50,000. The taxpayer must agree to pay off the balance in 84 months (i.e. 7 years) or less. The main benefit of a streamlined installment agreement is that the IRS usually will not file a notice of federal tax lien in an attempt to collect from you. Nor will the IRS ask you to complete financial statement Form 433-F so it can analyze your current financial situation.

Partial Payment Installment Agreements (PPIA)

A PPIA allows qualified taxpayers to pay less than the full amount owed based on their financial situation. This type of agreement requires:

• Full financial disclosure through Form 433-A or Form 433-B
• Documentation of income, expenses, assets and liabilities
• Regular reviews of your financial situation by the IRS
• Consideration of allowable expenses vs. actual expenses

The IRS uses standardized national and local expense guidelines to determine allowable living expenses. While your actual expenses may be higher, the IRS will only consider expenses within these guidelines when determining your monthly payment amount unless you negotiate a variance.

Negotiating Expense Variances for PPIAs

As a tax attorney with extensive experience negotiating with the IRS, I’ve found that Partial Payment Installment Agreements (PPIAs) represent one of the most powerful collection alternatives available to taxpayers. When properly structured, these agreements not only provide immediate financial relief but can strategically position clients to resolve their tax liabilities for much less than the full amount.

In my practice, I routinely secure expense variances that significantly reduce my clients’ monthly payment obligations (and the total amount they end up paying). Revenue Officers have discretion to deviate from national standards when presented with a compelling argument, substantiating documentation, and a supporting financial analysis.

For example, your current housing and utilities expense may be $4,000 per month, but the national standard for your family of 4 is actually $2,224 per month for housing and utilities. If you don’t negotiate a variance, the IRS will include the difference ($1,776) in the amount you pay to the IRS every month.

Here, an argument for a variance could be to consider the cost to move and additional transportation costs you will incur from lengthening your commute to work. Of course, the facts must support this position. This is just one example of many different arguments a tax attorney can make on your behalf to negotiate a variance and reduce your monthly payment amount.

Eligibility Requirements

To qualify for an IRS payment plan, you must:

• Be current with all tax return filings
• Not be in an open bankruptcy proceeding
• Meet specific debt thresholds for your desired plan type
• Provide detailed financial information for PPIA requests

How to Set Up an IRS Payment Plan

Step 1: Determine Eligibility

Review your total tax debt and financial situation to determine which payment plan type best fits your circumstances. The IRS provides an online payment plan tool to help assess your eligibility, but even if you don’t qualify according to their tool, you should reach out to a tax attorney for a second opinion.

Step 2: Gather Required Documentation

For basic installment agreements, you’ll need:

• Tax returns
• Personal/business information
• Bank account information for direct debit

For PPIAs, additional requirements include:

• Form 433-A (individuals) or Form 433-B (businesses)
• Recent pay stubs or profit/loss statements
• Bank statements
• Asset documentation

Step 3: Submit Your Application

You can apply:

• Online through the IRS website
• By mail using Form 9465
• With professional assistance from a tax attorney (especially important for Partial Pay Installment Agreements)

Step 4: Stay Compliant

After approval:

• Make all payments on time
• File all future returns by their deadlines
• Pay all future taxes when due

If the IRS Refuses Your Installment Agreement Proposal

If the IRS won’t agree to installment payments, it is usually for one of three reasons:

• Your living expenses are not all considered necessary. The IRS may deem your expenses extravagant. For example, if you have hefty credit card payments, make any charitable contributions, or send your kids to private school, expect the IRS to balk. Although reasonable people would disagree on what is necessary and what is extravagant, the IRS is rather stingy here.
• The information you provided on your Collection Information Statement, Form 433-A, is incomplete or untruthful. The IRS may think you are hiding property or income. For example, if public records show your name on real estate or motor vehicles that you didn’t list, or the IRS received W-2 or 1099 forms showing more income than you listed, be prepared to explain.
• You defaulted on a prior IA. While this doesn’t automatically disqualify you from a new IA, it can cause your new proposal to be met with skepticism.

IRS Installment Agreements Can Get Complex. We Can Help.

Our team of tax attorneys can help you evaluate your financial situation to recommend the optimal payment amount, prepare and file all required forms, and negotiate with the IRS on your behalf. For most clients, we can secure a lower payment amount and more favorable terms than you could on your own.