payment installment agreement

payment installment agreement

The Internal Revenue Service (IRS) allows taxpayers to pay off tax debt through an installment agreement. Because interest and penalties will apply, however, the IRS encourages taxpayers to pay taxes immediately. Interest and penalties can equal 8% to 10% per year.

If paying the entire tax debt all at once is not possible, an installment agreement is an alternative allowed by the IRS. The IRS has four different types of installment agreements: guaranteed, streamlined, partial payment, and non-streamlined.

Guaranteed Installment Agreement

To qualify for a guaranteed installment agreement with the IRS, the taxpayer must meet the following conditions:

  • Owe less than $50,000, (not including interest and penalties);
  • In the previous five years the taxpayer has filed tax returns, paid taxes owed, and has not entered into an installment agreement;
  • The taxpayer is unable to pay the tax liability when due or within 120 days;
  • The tax liability will be paid off within three years; and
  • The taxpayer must pay at least the minimum monthly payment (tax liability, interest, and penalties divided by 30).

Under this payment plan, the IRS will not file a federal tax lien against the taxpayer.

Streamlined Installment Agreement

In most cases, a taxpayer that qualifies for a guaranteed agreement will also qualify for the streamlined installment agreement. A streamlined installment agreement has the following requirements:

  • The tax liability, interest, and penalties do not exceed $50,000;
  • The balance can be paid off within 72 months; and
  • The proposed payment is equal to or greater than the "minimum acceptable payment" (the minimum acceptable payment is the greater of $25 or the minimum payment amount reached by dividing the tax liability, interest, and penalties by 50)

The taxpayer must pay a fee to set up the installment agreement or a reduced fee for a direct debit installment agreement. To restructure or reinstate a previous installment agreement, the IRS charges a different fee. Like a guaranteed installment agreement, the IRS does not file a federal tax lien.

Partial Payment Installment Agreement

A partial payment agreement allows the IRS to enter into agreements with taxpayers for the partial payment of a tax liability. To qualify for this arrangement, the taxpayer must complete a financial statement using Form 433-F to report income and living expenses. The IRS will review and verify the information. If the taxpayer has assets that can be sold to pay some of the tax debt, the IRS will require the taxpayer to provide additional information.

If approved, the taxpayer will be required to participate in a financial review every two years. This review may result in the increase in installment payments or the termination of the agreement.

Non-Streamlined Installment Agreement

If a taxpayer owes $50,000 or more and can make monthly payments to the IRS, a non-streamlined agreement is an option. The IRS will not automatically approve this agreement; instead, the taxpayer must negotiate with the IRS. The taxpayer must file Form 433-F, Collection Information Statement. This form collects information about income, debts, living expenses, assets, accounts, and allows the taxpayer to propose an installment payment amount.

It will usually take a few months for the IRS to review a proposed payment plan. The IRS may refuse a proposed agreement if it considers some of the taxpayer's living expenses unnecessary, if untruthful information was provided, or if the taxpayer failed to complete a prior installment arrangement.

If a taxpayer is unable to pay a tax liability through a non-streamlined agreement, consider filing an Offer in Compromise.

Ways to Make Payments

Taxpayers can make installment payments using the following methods:

  • Payroll deduction
  • Direct debit
  • Check or money order
  • Electronic Federal Tax Payment System (EFTPS)
  • Credit card
  • Online Payment Agreement (OPA)

When Will the IRS Revoke an Installment Agreement

The IRS can revoke an installment arrangement under the following circumstances:

  • The taxpayer misses a payment;
  • The taxpayer does not file a tax return or pay taxes after the agreement is entered into;
  • The taxpayer provided inaccurate information on Form 433-F; or
  • The taxpayer is paying under a partial payment installment agreement and a review indicates a change in their financial position.

Can't Pay Your Taxes? Don't Stress, Get Help From an Attorney

Getting hit with a huge tax bill can be stressful and, if you aren't well-versed in the tax code, oftentimes unexpected. If you are currently on an installment agreement with the IRS, and have questions about the process, including how streamlined and non-streamlined agreements work, now is time to contact a tax attorney in your area.

Department of Taxation and Finance

It is in your best interest to pay tax bills immediately to avoid additional interest and penalties. If you cannot pay, you may request an Installment Payment Agreement (IPA).

We base the decision to allow an IPA on a thorough review of:

  • prior history of compliance,
  • current financial condition, and
  • adherence to all department requirements.
  • Log in to your Online Services account (or create an account if you don't already have one), select Payments, bills and notices, and then Request an installment payment agreement; or
  • Have a copy of your bill and call 518-457-5434, enter your taxpayer ID number, and enter the four-digit PIN provided on your billing notice

We can only speak with you or your designated representative if they have a valid power of attorney form on file with us. (This includes a family member or anyone other than the person or principals of the assessed business.) See Power of attorney and other authorizations for the form and more information, including a mailing address.

If you can't meet the IPA requirements, we will start the civil enforcement process. See Publication 125, The Collection Process, for more information.

Additional Information on Payment Plans

What are the benefits of paying my taxes on time?

By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline.

If you're not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There's also a penalty for failure to file a tax return, so you should file timely even if you can't pay your balance in full. It's always in your best interest to pay in full as soon as you can to minimize the additional charges.

  • Avoid accruing additional interest and penalties
  • Avoid offset of your future refunds
  • Avoid issues obtaining loans

If you can't pay the full amount due, pay as much as you can and visit http://www.irs.gov/payments to consider our online payment options.

A payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe. You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame. If you qualify for a short-term payment plan you will not be liable for a user fee. Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action. See Publication 594, The IRS Collection Process (PDF).

What are payment plan costs and fees?

If we approve your plan, one of the following fees will be added to your tax bill. Changes to user fees are effective Jan. 1, 2017. For individuals, balances over $25,000 must be paid by direct debit. For businesses, balances over $10,000 must be paid by direct debit.

Paid with automatic payments from your checking account or check, money order or debit/credit card.

Fees apply when paying by card.

  • Apply online: $0 setup fee
  • Apply by phone, mail, or in-person: $0 setup fee
  • No future penalties or interest

Short-term payment plan (120 Days or Less)

Paid with automatic payments from your checking account or check, money order or debit/credit card.

Fees apply when paying by card.

  • Apply online: $0 setup fee
  • Apply by phone, mail, or in-person: $0 setup fee
  • Plus accrued penalties and interest until the balance is paid in full

Long-term payment plan (installment agreement) (paying in more than 120 days through automatic withdrawals)

Paid through direct debit (with automatic payments from your checking account).

  • Apply online: $31 setup fee
  • Apply by phone, mail, or in-person: $107 setup fee ($43 if low income)
  • Plus accrued penalties and interest until the balance is paid in full

Long-term payment plan (installment agreement) (paying in more than a 120 days)

Not paid through direct debit. Can be paid by any other electronic method such as direct pay or debit/credit card. May also be paid by check or money order.

Fees apply when paying by card.

  • Apply online: $149 setup fee ($43 if low income)
  • Apply by phone, mail, or in-person: $225 setup fee ($43 if low income)
  • Plus accrued penalties and interest until the balance is paid in full

Change an existing payment plan: Restructure or reinstate

Note: If making a debit/credit card payment, processing fees apply. Processing fees go to a payment processor and limits apply.

Why do I owe interest and penalties?

Interest and some penalty charges continue to be added to the amount you owe until the balance is paid in full. Learn more about penalties and interest.

Why do I have to pay a setup fee?

The Office of Management and Budget has directed federal agencies to charge user fees for services such as the Installment Agreement program. The IRS utilizes the user fees to cover the cost of processing installment agreements.

Am I eligible for a reduced user fee?

Individual taxpayers with income at or below established levels, based on the Department of Health and Human Services poverty guidelines, can apply and be qualified to pay a reduced user fee of $43 for establishing new agreements, $31 for direct debit agreements. If the IRS system identifies you as low income, then OPA will automatically reflect the reduced user fee.

How do I determine if I qualify for a Reduced User Fee?

Form 13844: Application for Reduced User Fee for Installment Agreements (PDF), contains the steps an individual can use to determine if they qualify for a reduced fee. If you are not charged a reduced user fee and you believe you are eligible, submit Form 13844. Qualified applicants should submit the form to the IRS within 10 days from the date of their installment agreement acceptance letter. Please submit the Form 13844 to:

PO Box 219236, Stop 5050

Kansas City, MO 64121-9236

How do I check my balance and payment history?

You can view your current balance and payment history by viewing your tax account. Viewing your tax account requires identity authorization with security checks. Allow one to three weeks (three weeks for non-electronic payments) for a recent payment to be credited to your account.

Am I eligible to apply online for a payment plan?

Your specific tax situation will determine which payment options are available to you. Payment options include full payment, short-term payment plan (paying in 120 days or less) or a long-term payment plan (installment agreement) (paying in more than 120 days).

If you are an individual, you may qualify to apply online if:

  • Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
  • Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.

If you are a business, you may qualify to apply online if:

  • Long-term payment plan (installment agreement): You have filed all required returns and owe less than $25,000 in combined tax, penalties, and interest.

If you are a sole proprietor or independent contractor, apply for a payment plan as an individual.

What if I am not eligible to apply online for a payment plan?

If you are ineligible for a payment plan through the Online Payment Agreement tool, you can still pay in installments.

How do I review my payment plan?

You can view details of your current payment plan (type of agreement, due dates, and amount you need to pay) by logging into the Online Payment Agreement tool.

What can I change with my payment plan online (not paid through a direct debit)?

You can use the Online Payment Agreement tool to make the following changes:

  • Change your monthly payment amount
  • Change your monthly payment due date
  • Convert an existing agreement to a direct debit agreement
  • Reinstate after default

You must contact us to make a change to an existing plan that makes payments through direct debit.

How do I revise my payment plan online?

You can make any desired changes by first logging into the Online Payment Agreement tool. On the first page, you can revise your current plan type, payment date, and amount. Then submit your changes.

If your new monthly payment amount does not meet the required payment amount, you will be prompted to revise the payment amount. If you are unable to make the minimum required payment amount, you will receive directions for completing a Form 433-F Collection Information Statement (PDF) and how to submit it.

If your plan has lapsed through default and is being reinstated, you may incur a reinstatement fee.

How do I manage my plan to avoid default?

In order to avoid default of your payment plan, make sure you understand and manage your account.

  • Pay at least your minimum monthly payment when it's due.
  • File all required tax returns on time and pay all taxes in-full and on time (contact the IRS to change your existing agreement if you cannot).
  • Your future refunds will be applied to your tax debt until it is paid in full.
  • Make all scheduled payments even if we apply your refund to your account balance.
  • When paying by check, include your name, address, SSN, daytime phone number, tax year and return type on your payment.
  • Contact us if you move or complete and mail Form 8822, Change of Address (PDF).
  • Confirm your payment information, date and amount by reviewing your recent statement or the confirmation letter you received. When you send payments by mail, send them to the address listed in your correspondence.

There may be a reinstatement fee if your plan goes into default. Penalties and interest continue to accrue until your balance is paid in full. If you received a notice of intent to terminate your installment agreement, contact us immediately. We will generally not take enforced collection actions:

  • When a payment plan is being considered;
  • While a plan is in effect;
  • For 30 days after a request is rejected, or
  • During the period the IRS evaluates an appeal of a rejected or terminated agreement.

When & How to Request a Partial Payment Installment Agreement

The Partial Payment Installment Agreement (PPIA) is similar to a regular installment agreement where you make monthly payments to the IRS for taxes owed. However, you are only paying back part of the taxes you owe over time. To apply, you must submit a full financial disclosure. That includes details about your income, assets, debts, and expenses.

Partial Payment Installment Agreements are harder to get than other types of Installment Agreements. However, they are easier to obtain than an Offer in Compromise. If the IRS has recently rejected an Offer in Compromise, you may want to apply for this instead.

Generally, the IRS only accepts these agreements if you don’t have enough assets to liquidate (there are exceptions) and you don’t have enough monthly disposable income to qualify for a regular installment agreement. In addition, the IRS must also believe that you are not going to earn enough money to cover your debt in the upcoming years.

Your monthly payment is determined by your Collection Information Statement. 433-A is filled out by individuals, and 433-B by businesses. This form tells the IRS how much or what your ability to pay is. This type of agreement can lead to you paying less than you owe because as the collection statute expiration date (CSED) expires for each year you were assessed taxes, that debt becomes “uncollectible.” Normally, the CSED period is ten years from the date the taxes were assessed.

Requirements for a Partial Payment Installment Statement

  • You have some ability to pay the IRS, but you cannot pay in full by the Statute of
  • Owe over $10,000 in tax debt, penalties, and interest
  • Completed Form 433 (Collection Information Statement)
  • Completed Form 9465 (Installment Agreement Request) or applied for Installment Agreement online
  • Filed all past tax returns
  • Are not in bankruptcy
  • Have not had an Offer in Compromise accepted
  • Have no assets or can’t access equity in assets because:
    • Assets are not sellable
    • Selling assets would not cover tax debt
    • Assets are not sufficient collateral to obtain a loan
    • Off limits, because your non-liable spouse does not want their part of the assets sold
    • Selling the assets would create financial hardship

How to Request a Partial Payment Installment Agreement

  • Print and complete Form 433-A if you are an individual or fill out 433-B if you are a business. See our page on Verified Financial Agreements for details on this form. Generally, will need backup documentation for expenses and income claimed on Form 433.
  • Print and fill out Form 9465 (Installment Agreement Request) or apply for an Installment Agreement online.
  • Estimate what you can pay every month. This can be tricky, as the IRS expects the maximum monthly payment that Form 433 shows you can afford. Your payment needs to cover your tax debt without being too expensive for your budget—remember if you miss a payment, you may need to pay a reinstatement fee of $89 dollars or you can lose the agreement altogether.
  • Send Form 9465, Form 433, and a copy of your tax return to the IRS. If you efile, you don’t need to include a copy of your return.

To be on the safe side, send your first payment and the fee for the installment plan with your application. The fee is usually $225, but if you opt for direct debit, it is only $107.

  • Wait. Usually, the IRS responds within 30 days.
  • If you don’t get a response within a month, continue to make payments, but also contact the IRS directly.
  • Overall, if you cannot afford to make the minimum monthly payment on a regular installment agreement, a partial payment installment agreement may be your best option. This is true especially if you can afford to pay the IRS at least $25 dollars or more a month. If your collection information statement (form 433) shows you cannot afford to pay the IRS at least $25 dollars a month, you may want to pursue a non-collectible status. For more information on PPIAs, visit the IRS here.

    Installment Agreements & Payment Plans

    Are you saddled with an insurmountable bill for your back taxes? IRS Installment agreements may offer a way out.

    What Are Installment Agreements?

    Installment agreements provide a way to pay what you owe to the IRS through a monthly payment plan. For many taxpayers with large back tax bills, paying what is owed at one time is simply not possible. Installment agreements make payments much more manageable and can be a viable alternative if you do not qualify for an offer in compromise or other tax liability relief. A tax lawyer in New Jersey can help you negotiate an IRS installment agreement you can afford.

    Important Considerations About Installment Agreements

    If you are considering entering into an IRS payment plan, there are some facts that New Jersey tax attorney, Todd S. Unger wants you to know about getting IRS help:

    Tax payment plans may not be your most affordable option because interest and penalties continue to accrue throughout the payment plan. Consequently, you may find that borrowing against your assets to pay everything at once is a better option than executing an IRS payment plan. You should discuss all of your options with your tax lawyer.

    Some lending options, like a second mortgage, may offer the benefit of tax deductible interest, whereas the interest and penalties on installment agreements are not deductible. Borrowing against, not withdrawing money from, a qualified retirement plan can also be an effective way to reduce your tax debt. There can be other financing options available to resolve your tax debt. You should discuss all of your options with a tax lawyer to achieve the fastest and most cost effective way of eliminating your back taxes.

    If you do not have the credit or assets against which to borrow, then you may need to negotiate your IRS installment agreements.

    Types of Installment Agreements

    • Guaranteed Installment Agreement: If you owe $10,000 or less to the IRS excluding penalties and interest, all your returns are filed, and you have not been in trouble with the IRS in the past 5 years, you have a statutory right to an installment agreement as long as you can pay in full the amortized balance within 36 months. In most cases, the IRS will not file a tax lien as long as you are compliant with the terms of the installment agreement.
    • Streamlined Installment Agreements for $25,000 or Less: If you can pay the back taxes you owe within 72 months, the balance owed is $25,000 or less, and you are current with all your filing requirements, then you can execute a payment plan with the IRS without disclosing your finances. The $25,000 threshold excludes assessed penalty and interest and includes individual and corporate income taxes and the trust fund recovery penalty. With a streamlined installment agreement, it is possible to negotiate the avoidance of a tax lien.
    • Streamlined Installment Agreements for $25,001 to $50,000: If the back taxes you owe for all tax years is between $25,001 to $50,000, you can pay the amount owed within 72 months, and are current with all filing and payment requirements, then you can request streamlined installment agreement as long as you permit the government to directly debit from your bank account. Assessed penalty and interest is not included in calculating the dollar criteria. You can pay off income taxes, individual or corporate, and the trust fund penalty through a streamlined installment agreement. If you execute this type of installment agreement before the IRS files a tax lien, then you can avoid one from being filed in the future as long as you stay compliant.
    • In-Business Trust Fund Express Installment Agreements: If you have a small business with employees, you may be eligible for this type of IRS payment plan. The advantage of an In-Business Trust Fund Express Installment Agreement is you do not need to complete a financial statement or financial verification as long as the taxes you owe is $25,000 or less at the time the agreement is established and you can pay the amount owed within 2 years. To be eligible, your business must be compliant with all of its filing and payment requirements and must enroll in a direct debit installment agreement if the unpaid balance of assessments is between $10,000 and $25,000.
    • Partial Payment Installment Agreements: Generally speaking, the IRS has 10 years to collect back taxes. If a payment plan will not full pay the taxes owed within this time period, but you have an ability to pay back some of the taxes you owe, then you can attempt to negotiate a partial pay installment agreement. These are difficult agreements to execute because the IRS will require a financial disclosure and verification of assets, liabilities, income, and expenditures. The IRS will also require that a Notice of Federal Tax Lien is filed. Additionally, the government will reopen the case at a later date to ascertain whether your ability to pay has increased.
    • Non-Streamlined Installment Agreements: If you do not qualify or cannot afford the above IRS payment plans, then you must complete an exhaustive financial disclosure and financial verification. Generally speaking, you will negotiate these payment plans with a local IRS collector known as a Revenue Officer. The Revenue Officer will ascertain your ability to pay, possibly require the liquidation of assets, and the elimination or reduction of household expenditures. In most of these cases, the IRS will file a tax lien to secure its interests against other creditors.

    Negotiating an IRS Installment Agreements

    The IRS will not negotiate with you if you have failed to file your tax return in a previous year or are not current with your estimated tax or payroll tax deposit requirements. Once an installment agreement is executed, you must remain in full compliance and pay all future taxes when due. You should discuss with a NJ tax attorney, your contractual obligations and responsibilities with the IRS to ensure that you have a complete understanding of your responsibilities under such agreements. The failure to stay compliant with the terms of the agreement can result in enforcement action and the filing of a tax lien. You should discuss any outstanding returns with your NJ tax attorney to ensure you do not face any challenges when negotiating with the IRS. Keep in mind, when owing any back taxes, the IRS is unlikely to back down.

    When making a request for an IRS installment agreement, you may need to disclose your assets, including cash and bank accounts, liabilities, income and expenditures. If your request is accepted, you will continue If you cannot pay the IRS, then a tax attorney can analyze your individual circumstance, and advise and execute the best course of action. The Law Offices of Todd S. Unger, Esq. provides a confidential consultation. To resolve your back taxes, complete the above contact form or call tax lawyer Todd S. Unger, Esq. today (855)-896-1566.

    The IRS may still be able to file a Notice of Federal Tax Lien against you while your installment agreement request is pending or in effect. However, as long as you are tax compliant, the IRS cannot seize your property, wages, or levy your bank accounts while the installment agreement offer is pending or while you are compliant with the terms of your installment agreement.

    IRS Installment Agreements & Payment Plans Lawyer

    Much of the process of installment agreements is driven by the policies and procedures of the IRS, but there is room for interpretation and negotiation. New Jersey tax attorney Todd S. Unger has the experience and in-depth knowledge of IRS policies and tax laws to help you walk away with an affordable installment agreement.

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