Entering into a payment plan with the IRS can be a good alternative to pay off your tax debt. When you apply for a payment plan, you agree to pay a certain amount each month until you pay off your outstanding debt. Learn the types of payment plans you can apply for and how to qualify to apply online.
In order to apply for an installment agreement with the IRS, you must be current with your tax obligations. This means that:
- You have filed all required tax returns.
- You are up to date with tax payments for the current period.
Guaranteed and Streamlined Installment Agreements
Payment options set by the IRS include full payment, a short-term payment plan, or a long-term payment plan. The payment options available to you will depend on your specific tax situation.
- Short-term payment plan: pay amount owed in 180 days or less if you owe less than $100,000 in combined tax, penalties and interest.
- Long-term payment plan (installment agreement): pay the amount owed in monthly payments if you owe $50,000 or less in combined tax, penalties and interest.
If you don’t have the financial ability to pay your full tax debt through a standard payment plan, you might also want to consider submitting an Offer in Compromise to settle your debt.
If you can’t pay your tax debt in full before the 10-year collection statute expires, you may qualify for a partial payment installment agreement (PPIA). To do this, you must prove to the IRS that you don’t have the financial ability to pay your debts through an ordinary IRS installment agreement.
The IRS will need you to complete Form 433-A or 433-F, Collection Information Statement. On that form, you’ll need to fully disclose all of your assets, income, and expenses, so the IRS can complete a financial analysis.
If you have assets with liquid value, the IRS may require you to attempt to borrow against them before agreeing to place you in a non-streamlined or partial payment arrangement.
The IRS will review your collection information return and then determine your ability to pay. If necessary, they may request additional documentation from you to substantiate the financial information you provided on the collection information statement.
If you have determined that you qualify for a payment plan, you can apply online or by calling your local IRS office.
You will be able to set up a short-term payment plan online if the amount you owe is less than $100,000. On the other hand, you will be able to set up a long-term payment plan if the amount you owe is less than $50,000. You can apply online for a payment plan here.
It is recommended that you consult with a tax professional before setting up a payment plan with the IRS. A tax expert can help you determine if you qualify for other tax debt relief programs that are more convenient for you.