Whether you call it an IRS installment agreement or IRS payment plan, the idea is the same — you make payments on the tax you owe. For those who cannot pay their back taxes immediately an installment agreement can be a reasonable payment option.   Installment agreements allow for the full payment of back taxes in smaller, more manageable amounts. 

IRS installment agreements (payment plan) generally require equal monthly payments. The amount of your installment agreement and the number you make will be based on the amount you owe and your ability to pay that amount within the time the IRS can legally collect payment from you.

You should be aware, however, that an installment agreement is more costly than paying all the back taxes you owe now. As with most revolving credit arrangements, the IRS charges interest and penalties on the unpaid portion of the debt.

Also, effective January 1, 2007 a $105 user fee will be added to the amount you owe and $52 for plans where the payments are deducted directly from your bank account.  Or for eligible individuals with income at or below certain levels who apply and qualify, the reduced user fee of $43 will generally be added to the amount you owe including agreements where payments are deducted directly from your bank account.

If you already have an IRS payment plan from a previous tax debt and your financial situation has changed, the IRS may be able to modify or restructure your installment agreement to include additional back taxes into one agreement.

Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government's interest until you make your final payment. However, while in the agreement, in most cases, the IRS will not take enforced collection actions such as bank levies and wage garnishment. If you can not afford to make a monthly payment you may qualify for an Offer in Compromise.

Get immediate help with an IRS Installment Agreement by contacting us toll free at 877-426-3121 for a Free Consultation. Or fill in the following form to request a confidential tax analysis.