How to Enter Into an Installment Agreement with the IRS

If you owe taxes to the Internal Revenue Service (IRS) but can’t pay the full amount upfront, an installment agreement allows you to make monthly payments over time. Here’s a step-by-step guide on how to set up an installment agreement with the IRS.

1. Determine If You Qualify

Before applying for an installment agreement, check if you meet the eligibility criteria:✅ Tax Debt Limits:

• Owe $50,000 or less (for individuals)

• Owe $25,000 or less (for businesses)

  
  

  ✅ Filed all required tax returns

  
  

  ✅ Unable to pay the full tax amount immediately

2. Choose the Right Type of Installment Agreement

The IRS offers different types of installment agreements based on the amount you owe:

A. Short-Term Payment Plan (Less Than 180 Days)

• For taxpayers who can pay the full amount within 180 days

• No setup fee, but penalties and interest continue to accrue

B. Long-Term Payment Plan (More Than 180 Days)

• For individuals who need more than 180 days to pay

• Can be set up through direct debit (automatic withdrawals) or non-direct debit

Payment Method	Setup Fee
Direct Debit (automatic withdrawals)	$31 (online) / $107 (by mail/phone)
Non-Direct Debit	$130 (online) / $225 (by mail/phone)
Low-Income Plan	$0 or reduced fee

3. Apply for an IRS Installment Agreement

You can apply using one of these methods:

✅ Online:

• Visit the IRS Online Payment Agreement tool

• Best for individuals owing $50,000 or less and businesses owing $25,000 or less

✅ By Phone:

• Call the IRS at 1-800-829-1040 (for individuals)

• Call 1-800-829-4933 (for businesses)

✅ By Mail:

• Fill out Form 9465 (Installment Agreement Request) and mail it to the IRS

4. Make Your Monthly Payments

Once your agreement is approved:✔️ Pay the minimum amount due each month✔️ Stay current with all future tax filings and payments✔️ Consider direct debit to avoid missed payments

5. What If You Can’t Make a Payment?

If you miss a payment, the IRS may:🚨 Charge additional penalties and interest🚨 Terminate your agreement🚨 Enforce collections (wage garnishment, bank levies, liens)

If you’re struggling, contact the IRS immediately to modify your agreement.

6. Alternatives to an Installment Agreement

If an installment agreement isn’t the best option, consider:🔹 Offer in Compromise (OIC): Settle your tax debt for less than you owe🔹 Currently Not Collectible (CNC) Status: Temporarily delay payments if you can’t afford them🔹 Requesting a Penalty Abatement: Reduce penalties if you have reasonable cause

Final Thoughts

Setting up an IRS installment agreement is a great way to manage your tax debt without facing aggressive collection actions. If you qualify, apply online, by phone, or by mail, and ensure you make timely payments to keep your agreement active.

💡 Need expert help? A tax professional or IRS-enrolled agent can assist in negotiating a plan that fits your financial situation.