The most common way to resolve tax debt issues by entering into a payment plan with the IRS. There are several types of payment plans.
Do you qualify for a payment plan?
The IRS will consider an installment agreement only if a taxpayer is current on his tax liabilities, which means that the taxpayer:
- has filed all tax returns
- and is current with tax payments for the current period, such as estimated tax payments
Guaranteed and Streamlined Installment Agreements
The IRS has short-term and long-term payment plans available:
- Short-term payment plan: 6-month payment terms for balances of $100,000 or less.
- Streamlined Installment Agreements (SLIA): 72-month payment terms for balances of $50,000 or less.
- Non-streamlined installment agreements (NSIA): 84-month payment terms for balances of up to $250,000.*
Temporary changes to the non-streamlined installment agreement process in response to Covid-19 are highly favorable to those who have tax debt. Previously, taxpayers seeking a non-streamlined installment agreement were required to submit an in-depth financial statement which is not being required.
Partial payment installment agreements
A partial payment installment agreement (PPIA) is available to taxpayers that cannot fully pay their tax debt before the 10 year collections statute expires.
In such cases, the IRS will request a collections information statement (Form 433-A or 433-F). On this form, you’re required to completely disclose all assets, income, and expenses, so the IRS can complete a financial analysis.
In addition, if you have assets that equity (such as an IRA, home, or vehicles), the IRS may request that you try to borrow against them before they agree to place you on a non-streamlined or partial payment installment agreement.
The IRS will then review your collections information statement to determine your ability to pay. They may request documentation to substantiate the financial information that you provided on the collections information statement.
How to set up a payment plan
Before contacting the IRS, it would be wise to discuss your situation with a tax professional to determine whether a payment plan is your best option. You may qualify for other relief.
If you’ve determined that a payment plan is what you need, you can set it up online or by calling the IRS.
In order to set up a short-term payment plan online, you must owe less than $100,000. To set up a long-term payment plan you must owe less than $50,000. You can set it up online here.
If you owe more than then these amounts, you may have to set it up over the phone by calling 800-829-1040.