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Understanding The Installment Agreement Tax Option

Dec 20

If you are unable to pay your taxes in full, an installment agreement offers a feasible solution. An installment agreement is a payment plan tailored for taxpayers who want to repay the Internal Revenue Service (IRS) their owed tax debt over time; it's vital for those needing extra time and should be thoughtfully considered.

What Are The Different Types Of Installment Agreements?

The IRS offers four distinct types of installment agreements: guaranteed, streamlined, partial payment, and non-streamlined. No matter your unique financial situation, there's a solution that fits you and simplifies the repayment process.

Guaranteed Installment Agreement.

The IRS Guaranteed Installment Agreement (GIA) provides taxpayers the opportunity to pay off their tax debt in manageable monthly payments. This "guaranteed" payment plan does not require any financial information or review - instead, you need only agree to settle your tax liability within three years and meet other conditions such as filing all required returns and paying current taxes on time. With a GIA, you can rest assured that your financial situation will be handled with care!

To apply for a GIA, the taxpayer must complete and submit Form 9465, Installment Agreement Request, to the IRS. The form can be submitted online, by mail, or by fax. If the taxpayer is unable to pay the full amount due within three years, they may be able to request an extension or request a different type of payment plan. It is important to note that interest and penalties will continue to accrue on the unpaid balance until the debt is paid in full.

Streamlined Installment Agreement.

Taxpayers who find themselves obligated to the IRS can take advantage of Streamlined Installment Agreements (SIAs) as a way to settle their debt. SIAs require no Collection Information Statement and are simple, straightforward payment structures that allow taxpayers to pay off their balance before the Collection Statute Expiration Date arrives. This method is perfect for those looking for an easy solution where they can keep more control over how much money is paid back every month in order to meet their responsibility with the IRS.

Partial Payment Installment Agreement.

A PPIA is a payment plan negotiated between a taxpayer and the Internal Revenue Service (IRS) which allows the taxpayer to make monthly payments with regularity. It's designed for taxpayers who don't have the means to immediately pay off their entire balance but are capable of making periodic payments. A PPIA can be beneficial since it expands the time frame of payment beyond the existing CSED, which still allows payment to be made while letting the debtor handle their current obligations. Disadvantages include taxes remaining unpaid, increasing interest penalties, and added associated fees. Overall, however, it is an attractive option for those facing financial difficulty when paying taxes due in order to remain compliant with IRS rulings.

Non-Streamlined Installment Agreement.

An IRS non-streamlined installment agreement is the perfect solution for individuals, businesses, and legal entities who need to pay off their tax debt without making a full payment in one lump sum. This type of arrangement covers debts from $50,000.00 up to $250,000.00 owed to the Internal Revenue Service (IRS). It's essential that taxpayers understand all aspects of this agreement before signing it as there are strict terms outlining when payments must be made and ensuring your debt will be completely paid off by the time the collection statute expires with no remaining balance due.

How Does An Installment Agreement Work?

Establishing an installment agreement with the IRS is a binding commitment for both parties. The taxpayer agrees to make regular payments towards their tax debt until it has been fully paid off, while the IRS reviews each individual's financial circumstances to guarantee that they can afford this payment plan before approving it.

Taxpayers must also keep up with current filing requirements while under an installment agreement. This means that any new tax year must be filed on time and any taxes due for that period must be paid in full before the IRS will consider extending or modifying the existing payment plan.

Benefits Of An Installment Agreement

Finding ways to pay off tax debt can be a daunting task. Fortunately, the IRS provides Installment Agreement payment plans for taxpayers who are unable to pay the full amount in one lump sum. With an Installment Agreement, you will have a set number of months—up to 72 or 84, depending on how much you owe—to repay your balance. Further benefits include smaller penalties and the option to pay your balance in full without additional fees or penalties outside of what has previously been specified by the agreement. It's also important to note that entering into an installment agreement does not extend the 10-year statute of limitation for the IRS to collect from you.


For taxpayers who cannot afford to pay their tax debt in full, an installment agreement can be a helpful tool for managing that debt without facing costly penalties or collection actions from the IRS. It is important for taxpayers considering this option to understand all of its terms and conditions before signing on so they know what they are getting into and can make informed decisions about how best to manage their finances moving forward. Ultimately, if used correctly, an installment agreement can help taxpayers get back on track without having to worry about dealing with aggressive collection tactics from the IRS.