Not everyone who owes the IRS can pay in full by the deadline. The tax code accounts for this. An installment agreement allows you to pay your tax balance over time in monthly installments, and it is one of the most commonly used resolution tools available to individual taxpayers.
Types of Installment Agreements
The IRS offers several types. A streamlined installment agreement is available for balances under $50,000 and generally does not require detailed financial disclosure. For larger balances or more complex situations, a formal agreement with full financial statements may be required. There is also a partial payment installment agreement for those who cannot afford the standard monthly amount — though this requires more documentation.
What It Costs
There are setup fees, which can be reduced for low-income taxpayers. Interest and penalties continue to accrue on the unpaid balance while the agreement is active, but the failure-to-pay penalty is cut in half once an installment agreement is approved. The IRS also files a federal tax lien to protect its interest, which can appear on your credit report.
What Happens If You Miss a Payment
A default on an installment agreement can lead to termination of the agreement and reinstatement of full collection powers, including levies. However, you may be able to reinstate the agreement or negotiate a modified plan if you act quickly and communicate with the IRS before the situation escalates.
Choosing the right type of agreement — and presenting the strongest case — can make a meaningful difference in what you pay each month. A free consultation can help you understand which option fits your situation.