Federal Tax Matters
If you can’t pay your tax debt in one lump sum, an Installment Agreement — a structured monthly payment plan with the IRS — could be the answer. Our tax attorneys and CPAs arrange one and negotiate favorable terms on your behalf.
The basics
An Installment Agreement is a formal arrangement between a taxpayer and the IRS to pay off a tax debt over an extended period. Instead of a single lump-sum payment, you make monthly payments until the balance is fully paid.
Your options
Depending on your balance and finances, you may be eligible for one of several agreements:
Taxpayers who owe $10,000 or less in combined tax, penalties, and interest and have filed all required tax returns may qualify for a guaranteed installment agreement. Under this agreement, the taxpayer agrees to pay the full amount owed within three years or the Collection Statute Expiration Date (CSED), whichever is earlier.
Generally, the Streamlined Installment Agreement criteria is divided into two tiers: a balance due of $25,000 or less, and a balance due of $25,001 to $50,000 (depending on the taxpayer type). The taxpayer must also pay by direct debit or through payroll deduction.
An installment agreement that will not pay the entire balance before the Collection Statute Expiration Date (CSED) is called a Partial Payment Installment Agreement (PPIA). This agreement requires the taxpayer to complete a financial statement and provide supporting documentation.
An Installment Agreement established under the Six-Year Rule is an NSIA (Non-Streamlined Installment Agreement). The Six-Year Rule refers to the taxpayer being required to pay their tax debt in full within 72 months (six years).
The cost of waiting
Interest keeps accruing on unpaid tax debt until it’s fully paid. It can’t be waived entirely, but the terms of your agreement — and, in Maryland, the Comptroller — may reduce the rate.
Why it helps
The Failure-to-Pay (FTP) penalty is reduced to 0.25% per month during an approved payment plan. Otherwise, the FTP penalty starts at 0.5% per month and increases to 1% per month if the taxpayer has received a Notice of Intent to Levy and fails to pay within 10 days. The maximum FTP penalty is 25% of the unpaid amount.
Taxpayers can pay off their tax debt over time in manageable monthly installments, allowing them to better manage their finances.
By entering into Installment Agreements, taxpayers may avoid more severe collection actions such as levies and wage garnishments.
Fulfilling the terms of an Installment Agreement helps taxpayers stay in compliance with the IRS.
Do you qualify?
Taxpayers must be current with all required tax filings. This means that the past six years of tax returns must be filed before requesting an Installment Agreement.
The total amount owed, including tax, penalties, and interest, determines the type of Installment Agreement for which a taxpayer qualifies.
The IRS will assess the taxpayer’s ability to pay based on their income, expenses, assets, and overall financial situation. This evaluation helps determine the appropriate monthly payment amount.
Taxpayers may be required to provide detailed financial information to the IRS as part of their request for an Installment Agreement, helping the IRS assess their ability to fulfill the terms of the agreement.
Next steps
Our experienced tax attorneys and CPAs help you navigate the Installment Agreement process and negotiate favorable terms. We assist businesses and individuals across tax collections, audits, U.S. Tax Court representation, and foreign bank account compliance — with bilingual staff and value-based pricing so quality representation is accessible to everyone.
