IRS Installment Agreements and Payment Options

Streamlined Installment Agreement

Best for Clients with balances up to $50,000

For clients with larger balances—up to $50,000—the Streamlined Installment Agreement offers a more flexible solution. This plan allows clients to pay off their Unpaid Assessed Balance (UBA) in monthly installments over a period of up to 72 months (six years) or full pay by the CSED, whichever is sooner.

 The main advantage of this option is that the IRS does not require a financial statement. This simplifies the application process, as clients do not need to provide detailed information about their income, assets, or expenses.

Another benefit is that the agreement can be set up online, making it convenient for clients to establish without needing in-person meetings or drawn-out paperwork.

If the client owes between $25,001 and $50,000, the IRS will demand a direct debit installment agreement. This is where the IRS would take the funds from the taxpayers’ bank account monthly or from their paycheck. For clients who owe less than $50,000 but can’t pay in full immediately, this agreement offers a quick and straightforward way to manage their tax debt while avoiding penalties and interest from piling up.   

The IRS will assess penalties and interest, they don’t recalculate daily. Instead, they accrue these penalties and interest and assess them periodically. 

Non-Streamlined/Routine Installment Agreement

Best for Clients with significant tax debt in excess of $50,000 or those who need more than 72 months to resolve their debt

For clients with more significant tax debt—over $50,000—or those who need more than 72 months to pay it off, the Non-Streamlined Installment Agreement may be a suitable option.

Instead of a 72-month requirement, the taxpayers must pay in full by the end of the Collection Statute Expiration Date (CSED). This agreement requires more extensive financial disclosures, as the IRS needs to evaluate your client’s ability to pay in detail.

To apply, clients must submit Form 9465 (Installment Agreement Request) and provide additional financial documentation, including Form 433-A. This form provides the IRS with a detailed view of the client’s assets, income, investments, and bank accounts, allowing agents to assess whether the client qualifies for the payment plan.

This option is more complicated than the streamlined agreement, but for clients with larger tax debts, it offers a structured way to pay down their balance over time.

Partial Payment Installment Agreement

Best for Clients who are unable to pay their full tax debt within the timeframe allowed by the CSED

For clients who cannot pay their full tax debt within the timeframe allowed by the Collection Statute Expiration Date (CSED), the Partial Payment Installment Agreement (PPIA) might be a solution.

This agreement allows clients to make smaller, more manageable payments based on their ability to pay without the expectation of paying off the full balance. Under this agreement, the IRS reviews your client’s financial situation every two years to determine whether adjustments to the payment plan are necessary. It is important to note that with a PPIA, the client may never fully pay off their debt, and any remaining balance may be written off after the statute of limitations expires.

While this option offers relief to clients who are facing severe financial hardship, it requires regular financial reviews by the IRS. As their accountant, you can help ensure they remain compliant with IRS requests and that their payments reflect their current financial situation.

 In these cases, the IRS will look closely at your client’s assets, income, and expenses before approving an installment plan. These types of agreements often require negotiation, and having an experienced accountant or Enrolled Agent by their side can help ensure they secure a payment plan that works for their financial situation.  

Currently Not Collectible (CNC)

Best for Individuals or businesses unable to pay any of their tax liability in the long term.

 There are times when your client just cannot pay anything. They have no extra money at the end of the month. The IRS does have a tool when the taxpayer cannot pay their debts due to financial hardship. The IRS will put the account into an uncollectible status.

 While the IRS will stop actively trying to collect on this account while they wait for the taxpayer’s financial situation to change (checking at least every two years), it does not mean that the balance due will go away.

The balance will continue to accrue penalties and interest, and a Notice of Federal Tax Lien may remain on the taxpayer’s property. The good news is an uncollectible status does not extend the Collection Statute Expiration Date (CSED), so the balance will still be written off in the ten-year statutory period.

 This may provide some temporary relief for your client, but this may also be a good time to explore other options, such as an Offer in Compromise.

Offer in Compromise (OIC)

Best for Individuals or businesses unable to pay their full tax liability.

 If you can get your client into a Partial Payment Installment Agreement or be declared as Currently Not Collectible, an IRS Offer in Compromise (OIC) is a tax relief option that allows taxpayers to settle their tax debt for less than the full amount they owe.

The IRS will consider an OIC if it believes that collecting the full amount is unlikely or would cause financial hardship to the taxpayer. To qualify, clients must provide detailed financial documentation, the IRS will evaluate their income, expenses, assets, and future earning potential. While this option provides significant relief, it is also difficult to qualify for, and the application process can be rigorous.

 As their accountant, you can guide your clients through the OIC process, ensuring that they provide all necessary documentation and that their offer accurately reflects their financial situation. The acceptance rate of Offers in Compromise is around 30% in recent years.

While .300 might be a pretty good batting average for a ball player, it means that the odds are stacked against your IRS submission. You’ve got to do everything you can to increase the chances of a favorable outcome.



Partial Payment Installment Agreement

Best for Clients who are unable to pay their full tax debt within the timeframe allowed by the CSED

For clients who cannot pay their full tax debt within the timeframe allowed by the Collection Statute Expiration Date (CSED), the Partial Payment Installment Agreement (PPIA) might be a solution.

This agreement allows clients to make smaller, more manageable payments based on their ability to pay without the expectation of paying off the full balance. Under this agreement, the IRS reviews your client’s financial situation every two years to determine whether adjustments to the payment plan are necessary.

It is important to note that with a PPIA, the client may never fully pay off their debt, and any remaining balance may be written off after the statute of limitations expires. While this option offers relief to clients who are facing severe financial hardship, it requires regular financial reviews by the IRS.

In these cases, the IRS will look closely at your client’s assets, income, and expenses before approving an installment plan. These types of agreements often require negotiation.

Also note that, under certain conditions, the IRS may ask your client to voluntarily extend the CSED for up to six years. This should only be done when an asset becomes available to the taxpayer.

Streamlined Installment Agreement

Best for Clients with balances up to $50,000

For clients with balances up to $50,000, the Streamlined Installment Agreement allows repayment in monthly installments over up to 72 months or by the CSED, whichever comes first. It does not require a financial statement and can be set up online for convenience. Balances between $25,001 and $50,000 require direct debit payments. Penalties and interest are assessed periodically, helping clients manage their tax obligations efficiently.

Non-Streamlined/Routine Installment Agreement

Best for Clients with significant tax debt in excess of $50,000 or those who need more than 72 months to resolve their debt

For clients with tax liabilities over $50,000 or needing more than 72 months to repay, the Non-Streamlined Installment Agreement may be appropriate. Payments must be completed by the Collection Statute Expiration Date (CSED), and detailed financial disclosures are required. Clients submit Form 9465 and Form 433-A to provide the IRS with a full overview of their finances. This option, though more complex than the streamlined agreement, offers a structured way to manage large tax debts.

Partial Payment Installment Agreement

Best for Clients who are unable to pay their full tax debt within the timeframe allowed by the CSED

For clients unable to pay their full tax liability before the Collection Statute Expiration Date (CSED), a Partial Payment Installment Agreement (PPIA) can provide a manageable solution. This arrangement allows reduced payments based on financial capacity, with the IRS reviewing the client’s situation every two years. Remaining balances may never be fully repaid and could be discharged after the statute of limitations. 

While providing relief for those facing financial hardship, a PPIA requires ongoing IRS assessments. Professional guidance from an accountant or Enrolled Agent can help ensure compliance and secure a plan that aligns with the client’s financial position.

Currently Not Collectible (CNC)

Best for Individuals or businesses unable to pay any of their tax liability in the long term.

There are times when a client cannot pay due to financial hardship. The IRS can place the account in uncollectible status, pausing collections but not stopping penalties, interest, or liens. This offers temporary relief and may be a good time to consider options like an Offer in Compromise.

Offer in Compromise (OIC)

Best for Individuals or businesses unable to pay their full tax liability.

If your client qualifies for a Partial Payment Installment Agreement or is Currently Not Collectible, an IRS Offer in Compromise (OIC) lets them settle tax debt for less than owed. Qualification requires detailed financial documentation, and acceptance rates are around 30%. As their accountant, you can help ensure the submission is accurate to improve the chances of approval.

Partial Payment Installment Agreement

Best for Clients who are unable to pay their full tax debt within the timeframe allowed by the CSED

For clients unable to pay their full tax debt by the CSED, a Partial Payment Installment Agreement (PPIA) allows smaller, manageable payments based on ability to pay. The IRS reviews the client’s finances every two years and may require negotiation. Remaining balances could be written off after the statute of limitations, and in some cases, the IRS may request a voluntary CSED extension if assets become available.