Understanding the Different Types of IRS Tax Installment Agreements

October 13, 2023
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Are you feeling overwhelmed by your mounting IRS tax problems? What can you do if paying your tax debt quickly is simply not an option? For your fortune, the IRS allows taxpayers to pay off tax debt through an IRS installment agreement. An IRS installment agreement, also called an “IRS Installment payment plan”, allows taxpayers to pay their tax debt in parts, over an extended period of time. Find out more about each type of IRS payment agreement. This way, you can figure out which one is a good option for you, and you can finally say goodbye to your IRS tax problems!

What is an IRS Tax Installment Agreement?

The IRS offers a payment plan that allows taxpayers to pay their taxes in partial payments over a specific period of time. A taxpayer can apply for an IRS tax installment agreement if they meet the following criteria:

Taxes were filed and paid on time in records dating back 5 years.
All tax returns are filed.
No record of requesting for a tax installment agreement exists in past 5 years
Agreement to file and pay taxes in time for the given time slot.

If you meet the above criteria, the IRS may allow you to pay your taxes in installments, provided the total amount owed is not more than $10,000. The maximum amount of time the IRS gives a taxpayer to clear the balance is 36 months. If you are unable to pay your taxes in full, you can request an IRS tax installment agreement by filling Form-433-F to avoid the possibility of facing a federal tax lien in the future, or get in touch with an IRS installment agreement legal expert in Dallas.

The 4 Types Of IRS Installment Agreements

The IRS offers taxpayers four different types of payment plans. These include guaranteed, streamlined, partial payment, and non-streamlined agreements. Let’s explore what each one of these IRS installment plans entails.

1. Guaranteed Installment Agreement

A taxpayer who owes the IRS $10,000 or less is eligible to file for a Guaranteed Installment Agreement. Only individuals can apply for this payment plan and must pay their balance, including penalties and interest, within 3 years. This type of installment agreement ensures that the IRS won’t file a tax lien against you. This allows you to pay back your tax debt in installments without worrying about extra tax problems.

To apply for this type of IRS tax installment agreement, you have to meet the eligibility criteria, including:

Owing the IRS less than 10,000 dollars
Not having an installment agreement in the previous year. This means having correctly filed and paid the previous year’s taxes.
Not being able to pay tax liability at the right time or within 120 days of that date
Being able to pay off the liability within three years (in installments)
Committing to making the minimum monthly payment (at least)

If you meet these criteria, then you might want to consider applying for this IRS installment agreement.

2. Streamlined Agreement

If you qualify for a guaranteed agreement, then you’ll likely qualify for a streamlined agreement. By learning about both options, you can make an informed choice about an IRS installment agreement. In both cases, you’ll be able to pay off your debt in installments, without being subject to a tax lien.

Eligibility requirements do vary a little bit. Rather than a maximum of $10,000 in debt, you can owe up to $50,000 with this type of IRS payment agreement. Individuals and out-of-business sole proprietorships that owe the IRS $50,000 and agree to pay through direct debit or payroll deduction or active businesses that owe a total of $25,000 or less in taxes are eligible to file for a Streamlined Installment Agreement, or SIA.

Direct Debit in IRS Installment Agreements is an agreement on the mode of payment with the IRS in which the monthly payments are directly deducted from a taxpayer’s bank account. Taxpayers who owe the IRS $50,000 or less are eligible to apply for a DDIA. A taxpayer may also qualify for such a payment plan if they are seeking the withdrawal of a tax lien.

In the case of streamlined installment agreements, taxpayers, whether individuals or sole proprietors, are given up to 72 months to pay the balance, whereas businesses are usually given up to 36 months. To access this type of payment installment agreement, you’ll have to pay a fee. The few can be reduced if you opt for payments to be made directly from debit.

3. Partial Payment Agreement

Taxpayers who file for an Offer in Compromise but do not get approval, can request a Partial Payment Install Agreement, or PPIA. PPIA is a special payment plan in which the IRS allows taxpayers to pay smaller monthly installments than in case of other types of installment agreements. The IRS will come to an agreement with the taxpayer to accept partial payment of the taxpayer’s tax liability. The application procedure is different in such instances. You have to complete a financial statement form, which the IRS will carefully review. Once the information is verified, the IRS will proceed with deliberations. When approved, you’ll enter into the agreement on the condition of participating in a financial review within two years when changes can be made to the payment installments.

4. Non-streamlined Agreement

Lastly, this option applies to those owing more than $50,000 to the IRS. To get this type of IRS installment agreement approved, you have to fill out the necessary forms and provide the IRS with ample information. This information will be reviewed to come up with a decision. An experienced Dallas tax attorney can help you with this type of IRS installment agreement.

Application Process

In lieu of your total taxes owed and financial situation, there are four ways to apply for an IRS tax installment agreement.

Fill out the Form 9465 (Request for Installment Agreement) and directly mail it to the IRS.
Call the IRS toll-free helpline, 1-800-829-1040, and request an installment agreement.
If you are an individual who owes taxes of $50,000 or less to the IRS or a business that owes $25,000 or less, fill out the online tax installment agreement application.
Hire a tax professional to negotiate with the IRS on your behalf.

Need help getting an IRS installment agreement?

IRS tax problems are not impossible to resolve. Take help. If you are unable to pay your taxes, file for an installment agreement to avoid a potential tax lien. While at it, it is advisable to seek the help of an IRS tax lawyer. The Law Offices of Nick Nemeth has experienced tax law attorneys that can help you apply for and get approval for an IRS installment agreement. Do you want to find out what the best resolutions are to your IRS tax problems? Call us at (972) 484-0829 for a free consultation.

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What is an IRS Tax Installment Agreement?