Can I ask to make installment payments on the amount I owe?

Yes, if you owe less than $25,000 and have filed all required federal tax returns. If you owe MORE THAN $25,000, you may have to complete a "Collection Information Statement" to request an installment agreement.

If you cannot pay the full amount due as shown on your federal individual income tax return, you may ask to make equal monthly installment payments. The IRS charges a user fee* (see below) to setup an installment agreement. Do NOT delay filing your tax return because you are unable to pay in full. If your tax return is not filed in time, you may have to pay a "failure to file" penalty, in addition to a "failure to pay" penalty, and interest. You should pay as much as you can with the tax return, to lower interest and penalty charges.

Collection Period

Generally the Internal Revenue Service has 10 years from the assessment of a tax liability to collect the liability. The date by which the liability must be collected is called the Collection Statute Expiration Date (CSED).

Alternatives to an Installment Agreement

Before requesting an installment agreement, you should consider other less costly alternatives, such as a bank loan. The interest rate a bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. Remember, penalties and interest will be added to the balance you owe even if an installment agreement is approved.

Future Tax Refunds

As a condition of an installment agreement, any tax refund due in a future year will be applied against the amount owed. Therefore, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. The IRS will automatically apply the refund to the taxes owed.  If the refund does not take care of the tax debt, then the installment agreement continues until all of the terms are met.

Timely Installment Payments

Throughout the term of an installment agreement, payments must be made on time. If payments cannot be made due to a change in financial condition, you should contact the IRS immediately. Failure to make timely payments could default the agreement. A defaulted installment agreement could subject your account to enforced collection action and potentially have a negative effect on your credit standing. The IRS charges a user fee* (see below) to reinstate an installment agreement.

Restructuring an Existing Installment Agreement

If you already have an installment agreement from a previous amount owed, you may request a restructuring of your existing installment agreement. All of the amounts owed could be included in one installment agreement. Additionally, a "Collection Information Statement" may have to be completed to further illustrate your financial situation. The IRS charges a user fee* (see below) to restructure an existing installment agreement.

When NOT to Request an Installment Agreement

Do NOT request an installment plan if you are in bankruptcy or the IRS has accepted your Offer-in-Compromise (OIC)!

Annual Statement of Taxes Due

In accordance with the law, if you are in an installment agreement you will receive an annual statement from the IRS. The statement provides the amount owed at the beginning of the statement period, the payments (credits) posted to account(s), any fees or assessments, and the ending balance. Currently, the annual statement is sent each year in July.

*The user fee for NEW direct debit installment agreements (where payments are deducted directly from your bank account) is $52. The fee for other new installment agreements is $105. The fee to restructure an existing or reinstate a defaulted installment agreement is $45.

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