Home | An Overview of Installment Agreements

Installment Agreements for Tax Debt Solutions

May 01, 2023

Installment Agreements, more commonly referred to as Payment Plans by the States, are the most common resolution options taxpayers pursue to resolve their tax debt.

What is an Installment Agreement/Payment Plan?

They are an agreement between a taxpayer and the IRS or applicable State to pay the taxes owed over the course of a specific timeframe. This timeframe can be based on several factors, such as the taxpayer’s financial situation, the total amount of tax debt owed, and the amount of time the IRS or State has left to collect on the debt.

Are there different types of Installment Agreements or Payment Plans?

Yes! However, most States only have one type of payment plan with the timeframe determined based on the taxpayer’s financial ability to repay the debt. A few States have set in place a maximum number of months a tax debt can be repaid, which range from 12 months to 36 months.

The IRS has a few different types of agreements that are either long-term or short-term. The agreements available can also depend on whether it is an individual taxpayer or a business taxpayer. Below are a few of the Installment Agreement options available from the IRS:

  • In-Business Trust Fund Express – Only available to businesses with a balance of $25,000 or less. The tax debt must be paid in full within 24 months.
  • In-Business Trust Fund – Only available to businesses and stipulates that the tax debt must be fully paid before the Collection Statute Expiration Date (CSED) lapses.
  • Guaranteed Installment Agreement – Only available to individuals with a balance of $10,000 or less. This is one of the easier agreements to set up with the IRS, but it must be noted that the tax debt must be paid in full within three years.
  • Streamlined Installment Agreement – Available to both individual and business tax accounts, however, there are two different types of agreements in this category. One is for tax debt between $10,000 and $25,000, and the other is for tax debt between $25,001 and $50,000. The latter is only available to individuals and CLOSED businesses. Both must be paid within 72 months or before the CSED lapses.
  • Partial Payment Installment Agreement – This agreement is available to individuals and businesses and implies the tax debt will not be fully paid before the CSED lapses.

There are also Seasonal and Tiered agreement options available. The seasonal usually applies to businesses that only operate during specific months throughout the year, but not all twelve. A tiered agreement can allow taxpayers to either reduce debts elsewhere or clean up their financial situation to afford larger payments toward a tax debt the longer the agreement is in place. These agreements are less common compared to the ones listed above.

What is the process of determining and setting up an Agreement to pay a tax debt?

The process will differ depending on a few factors. As outlined above, the total balance of a tax debt will be the main factor. Second, a review of each tax period’s Collection Statute Expiration Date will be completed to determine the remaining time the IRS or State has left to collect on the debt. Not all States have expiration dates for collecting a past-due tax owed; check your local State’s tax laws/codes to determine what is applicable to you or your client’s situation.

From there, if a financial analysis must be conducted to determine how much a taxpayer can afford to pay each month, a thorough review of all income, allowable expenses, liabilities, and assets will be completed. Once these have all been reviewed, it can be determined which agreement a taxpayer will qualify for and should pursue.

The next step is to compile and submit a proposal to the taxing authority for review and consideration. The less the tax debt, the less review and negotiations spent on establishing an agreement. Conversely, more complex tax debts will need more attention, information, and supporting documentation; remember that the tax agencies are on a mission to collect as much as possible to be applied toward the debt each month! Once the taxing authorities have reviewed a proposal, they will issue a determination to approve or deny an agreement. Most denials will have Appeal rights, so don’t think this is a one-time shot at getting an agreement set at your desired level.

Once an agreement is approved and set up, it will be important for the taxpayer to make all monthly payments timely and in full, file all tax returns on time, and pay any taxes due on time and in full. If a taxpayer defaults on an agreement, future negotiations become harder and less in the taxpayer’s favor.

In Summary

Despite how intimidating the IRS or State Taxing Department may appear, they are willing to work with taxpayers who wish to resolve their tax debt. Knowing your options is important and beneficial when pursuing a resolution. The Golden Lion Tax Solutions team has over 23+ years of experience identifying which Installment Agreements are in a client’s best interest when taking into account tax liens, penalty and interest accrual, and correctly identifying a client’s limited means or capabilities to address the tax debt. If you or your client has a tax debt and would like to review the best options to address it, reach out to the Golden Lion Tax Solutions team today.


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For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.