IRS INSTALLMENT PLANS
An installment agreement is an agreement to pay the taxes over a period of time in monthly installments. If you and the IRS have an installment agreement, the IRS will not take any other collection action unless you default on the agreement.
Small Tax Debts
If you owe less than $10,000, the IRS must allow you to pay in installments if you meet three conditions. First, you must have filed and paid all your taxes on time for the past five years. Second, the IRS must be satisfied that you cannot pay off the debt immediately. And third, you agree to pay off the debt within three years and to comply with all tax laws during that time.
The IRS will then send you a monthly statement showing how much still remains to be paid.
Large Tax Debts
For larger debts (over $10,000), the IRS will want to look at your overall financial situation. You will need to fill out a financial declaration listing your assets, liabilities, and monthly income and expenses (Form 433-A). If you operate a business, you also must fill out the business financial declaration (Form 433-B). Depending on your circumstances, the IRS may want you to fill out Form 433-D and/or 433-F.
The IRS will want documents that prove your income and expenses. These can be submitted with the offer or provided when they ask for them.
Based on this financial information, the IRS will then determine what they consider to be a reasonable monthly payment.
What If I Owe Employment Taxes?
The IRS is less likely to accept an installment agreement when employment taxes are owed. They have been known to threaten to shut down the business if the taxes are not paid within as few as six months. Since Congress passed an IRS “restructuring” bill in 1998, there has been some softening in this approach, but they are still likely to review an installment request more carefully if you owe employment taxes.