Individual IRS Installment Agreement

You owe back taxes. If you do not have the money now and you need some time to pay back the taxes, you can request an IRS Installment Agreement.

If you can’t afford the IRS Installment Agreement payments then you should review IRS Tax Settlements (Offers in Compromise) and IRS Hardship.

Please note: An IRS Installment Agreement will not stop penalties and interest. Penalties and interest will continue to accrue.

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IRS Installment Agreements – 5 Types

There are 5 types of IRS Installment Agreements. The different types depend on the amount of taxes owed.

Type 1: $0 – 10,000 of Taxes Owed
You can request a Guaranteed IRS Installment Agreement. The IRS will agree to payment terms for up to 3 years (36 months). You don’t need to provide personal information to the IRS.

Type 2: $0 – 25,000 of Taxes Owed
You can request a Streamline IRS Installment Agreement. The IRS will agree to payment terms for up to 6 years (72 months). You don’t need to provide personal information to the IRS.

Type 3: $25,000 – 50,000 of Taxes Owed
You can request a Streamline IRS Installment Agreement. The IRS will agree to payment terms for up to 6 years (72 months). You do need to provide personal information to the IRS. Also, IRS Installment Agreement payments must be automatically taken out of your personal bank account. The IRS will request that you fill out Form 433A or Form 433F to report personal information. Form 433D is used to set up automatic payments.

Type 4: Owe More Than $50,000 of Taxes
You can request a Regular IRS Installment Agreement. The IRS will ask you to provide personal financial information. Your monthly payment amount will depend on how much the IRS thinks you can afford. For example, you owe $75,000. The IRS determines you can afford to pay $2,000 per month. IRS will agree to an IRS Installment Agreement for no lower than $2,000 per month. If you are unable to afford $2,000 per month payments, you may need help negotiating with the IRS. The IRS will request that you fill out Form 433A or Form 433F to report personal and financial information.

Type 5: Any Amount of Taxes Owed
You can request a Partial Payment IRS Installment Agreement if you are unable to afford the other IRS Installment Agreement types. The IRS will ask you to provide personal and financial information. The IRS will determine the payments you can afford. For example, you owe $50,000. The IRS determines you can afford $250 payments. The IRS will agree to an IRS Installment Agreement for no lower than $250 per month. If you are unable to afford $250 per month payments, you may need help negotiating with the IRS. The IRS will request that you fill out Form 433A or Form 433F to report personal and financial information.

Please note: If you qualify for a Partial Payment IRS Installment Agreement, then you may qualify for an IRS Tax Settlement. We recommend an IRS Tax Settlement over a Partial Payment IRS Installment Agreement. A Partial Payment IRS Installment Agreement can last for 8 to 10 years. You can pay an IRS Tax Settlement in 5 to 24 months.

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IRS Installment Agreement Monthly Payment Amount

There is an easy way to estimate the monthly payment amount. You owe $30,000. You want to see if you can afford Type 3, IRS Streamline Installment Agreement. You want to pay back the taxes over the next 6 years. This is how you estimate the monthly payments.

There are 72 months in 6 years. Divide the total taxes owed by 72 months. Then multiply the result by 1.2: $30,000 / 72 months x 1.2 = $500 per month. The IRS will accept a $500 per month IRS Streamline Installment Agreement.

3 Ways to Make IRS Installment Agreement Payments

1) By mail – Payments by mail should be made payable to U.S. Treasury. On the memo line of your check write your social security number, tax form, and years owed. Tax form for personal tax returns is 1040. Tax form for trust fund penalties is CivPen. Payments should be made 10 days before the payment is due to allow for processing time. Mail payments to: Department of Treasury, Internal Revenue Service, Kansas City, MO 64999-0010

2) Online – You can register for the Electronic Federal Tax Payment System EFTPS program to make the payments online. It takes about 2 to 3 weeks to set up an EFTPS account.

3) Automatic Debit – The payments can be automatically taken out of your bank account. The IRS will ask you to fill out Form 433-D, Installment Agreement, with your bank routing and account numbers. It may take the IRS 30 to 60 days to set up the automatic debit. The IRS will notify you when the automatic debit is set up. You may need to mail in payments for the first two months while the IRS is setting up automatic payment.

Paying IRS Early and Tax Refunds

You can pay extra. Paying extra will not increase your monthly payment amount. It will reduce the number of monthly payments you make under the IRS Installment Agreement.

The IRS will take your future tax refunds. The IRS will apply your tax refunds to back taxes owed. This will reduce the number of monthly payments you make under the IRS Installment Agreement.

If you owe back taxes and you cannot pay in full, we recommend requesting an IRS Installment Agreement. The IRS Installment Agreement will not reduce the taxes you owe. The agreement will give you time to pay back the taxes. If you are unable to afford the IRS Installment Agreement payments, then consider requesting an IRS Tax Settlement (Offer in Compromise) or IRS Hardship.