Installment Agreements

Dealing with unpaid taxes is never easy, but you have options. One of the most common ways to pay down an obligation to the IRS is an installment agreement, a payment plan that lets you pay a tax debt over time and generally stops levies while it is in effect.

An installment agreement lets you pay your tax debt over time instead of in a lump sum. This option fits taxpayers who have some ability to pay but not enough to zero out the account entirely, and the IRS reviews your finances before deciding whether to offer it.

Once an agreement is approved, you make fixed monthly payments until the debt is paid off or otherwise resolved. Interest and penalties may continue to accrue. But the IRS generally cannot levy while your request is pending or the agreement is in effect, and setting one up early generally gives you more control over the process.

Does the IRS have to accept a payment plan?

The IRS does not have to accept every proposed payment plan. Approval depends on factors like the amount of the debt and your current financial situation, including obligations beyond income alone. This option is only open to you if you have filed your past tax returns.

Smaller balances, generally $50,000 or less, may qualify for what the IRS calls a simple payment plan, which needs no financial statement. Larger debts can require more detailed financial information. Provide the documents up front, and propose a monthly payment your financial statement supports.

Benefits of an installment agreement

• Pauses levies: while a request is pending or an agreement is in place, the IRS generally cannot levy, which protects your income and assets while you make payments.
• Provides predictable monthly payments: a structured plan lets you budget with confidence, since you know what you owe each month.
• Keeps you in good standing: staying current on payments and future filings helps you remain in compliance and avoid additional penalties or enforcement.
• May help avoid future problems: addressing the debt early reduces the risk of liens, levies, or other disruptions to your finances.
• Creates a path to resolution: instead of a growing balance with no plan, you move steadily toward paying off the debt.

If a monthly payment is not realistic given your income and expenses, an offer in compromise may settle the balance for less than you owe. Our Tax Debt Relief overview covers the full range of options for resolving an IRS balance.