How Do You Qualify for an IRS Installment Agreement?
Quick answer
An IRS Installment Agreement is a formal monthly payment plan that lets you pay an assessed federal tax balance over time instead of all at once. Most individual taxpayers who have filed required returns and can propose reasonable monthly payments based on their income and expenses can qualify. Larger balances or complex financial situations typically require a Collection Information Statement (Form 433 series) and more negotiation.
Why this matters
In my practice I’ve seen taxpayers avoid liens, levies, and severe stress by getting an agreement in place quickly. Even when interest and penalties continue to accrue, an installment agreement can stop aggressive collection steps and make repayment structured and predictable. The IRS public guidance explains the basic program and how to apply (see IRS – Apply for an Installment Agreement and Understanding Installment Agreements).
Sources: IRS — Apply for an Installment Agreement (https://www.irs.gov/individuals/apply-for-an-installment-agreement), IRS — Understanding Installment Agreements (https://www.irs.gov/taxpayers/understanding-installment-agreements).
Who is eligible?
- You must have filed all required tax returns. The IRS will not approve most installment agreements if you have unfiled returns. (If you haven’t filed, file before applying.)
- You must owe an assessed federal tax liability (taxes, penalties, interest).
- You cannot be in active bankruptcy proceedings. Bankruptcy changes the IRS collection process and usually prevents installment agreements while the case is open.
- You should not be in default on a prior installment agreement. Previous defaults can affect acceptance and require reinstatement or a new negotiation.
The IRS categorizes payment options by balance size and complexity. Short-term plans (usually under 120 days) let you avoid a formal setup fee in many cases, while long-term plans (monthly payments) may require documentation depending on the amount owed.
Common program types and paperwork
- Online Payment Agreement (OPA): The IRS online tool is the fastest way to request a plan. It’s available for many taxpayers and provides instant feedback when the balance and taxpayer circumstances meet online criteria. (See IRS — Online Payment Agreement Application.)
- Form 9465 (Installment Agreement Request): If you can’t use the online tool, Form 9465 is the paper alternative for requesting a plan.
- Form 433-F or Form 433-A (Collection Information Statement): When you owe a larger amount or the IRS requests verification of income/expenses, you’ll complete one of these forms so the IRS can determine an acceptable monthly payment.
Filing the correct forms and choosing direct debit will speed approval and reduce the chance of default.
Costs and financial effects to expect
- Setup fees: The IRS charges a user fee to set up many installment agreements. Fees vary depending on whether you apply online, accept direct debit, or apply by phone/paper. Low-income taxpayers often qualify for reduced or waived fees. Because fees can change, check the IRS Online Payment Agreement page for current amounts.
- Interest and penalties: Interest and most penalties continue to accrue on the unpaid balance until it’s paid in full. Entering a plan stops most enforced collection actions but does not stop statutory interest from compounding. The IRS keeps a public page on interest and penalties related to late payments.
- Risk of lien or levy: An installment agreement can prevent immediate levies if set up quickly, but the IRS may still file a Notice of Federal Tax Lien in some situations. Defaulting on the agreement can resume aggressive collection actions.
Tip from practice: choose direct debit when possible — it lowers the monthly default risk and often reduces the setup fee. Also, propose a monthly amount you can sustain; if payments are too tight, you risk default and more penalties.
Step-by-step application checklist
- Confirm all required tax returns are filed for the years the IRS identifies.
- Pull together proof of income (pay stubs, 1099s, business cash-flow statements) and recurring expenses (rent/mortgage, utilities, insurance). If the IRS requests a Form 433, these documents speed the process.
- Decide which application route: online tool (fastest), phone, or Form 9465 paper request.
- Calculate a realistic monthly payment — consider what you can maintain after essential living costs. If you can pay the balance within 120 days, ask for a short-term plan to avoid long-term fees.
- Opt for direct debit if eligible — this lowers default risk and often reduces or waives additional fees.
- Keep records of acceptance, scheduled withdrawals, and proof of payments.
When the IRS will request financial documentation
The IRS will typically ask for a Collection Information Statement (Form 433-F for individuals not self-employed or 433-A/433-B for others) when:
- Your total tax liability exceeds the thresholds for simplified online approval, or
- You propose a monthly payment that the IRS wants to verify against your expenses and assets.
Completing these forms fully and honestly is crucial. Incomplete or inconsistent answers are common causes of delay or denial.
Alternatives and when to pursue them
- Offer in Compromise (OIC): If you can’t pay the full amount and your reasonable collection potential is less than the assessed tax, an OIC may settle the debt for less than the full balance. Preparing an OIC usually requires a detailed financial package; see our guide on Preparing a Financial Disclosure Package for an Offer in Compromise and When an Offer in Compromise Makes Sense. (Internal links: Tax Debt Relief Options: From Installment Agreements to Offers in Compromise — https://finhelp.io/glossary/tax-debt-relief-options-from-installment-agreements-to-offers-in-compromise/, Preparing a Financial Disclosure Package for an Offer in Compromise — https://finhelp.io/glossary/preparing-a-financial-disclosure-package-for-an-offer-in-compromise/.)
- Currently Not Collectible (CNC): If you have no ability to pay and collection would create hardship, ask the IRS to place your account in CNC status. This pauses active collection but interest continues.
Common mistakes and how to avoid them
- Applying before filing required returns. Always file first.
- Underestimating living expenses or overcommitting to payments. Use conservative budgeting; missed payments can lead to default and renewed collection.
- Skipping direct debit when eligible. Direct debit reduces administrative errors and lowers default rates.
- Assuming penalties stop at plan setup. Interest and late-payment penalties typically continue; consider whether a short-term plan is feasible to minimize additional costs.
What happens if you miss a payment
Missing a payment can cause the agreement to default. The IRS then may resume collection actions (levy wages, bank accounts, or file a lien). If you miss a payment, contact the IRS quickly: sometimes the IRS will reinstate a plan or allow an adjustment if you can show reasonable cause.
Practical negotiation tips I’ve used with clients
- Start with a realistic monthly offer, not a stretch payment that you’ll likely miss.
- Provide clear documentation for unusual expenses (medical bills, child support) — the IRS will consider reasonable cause and necessary living expenses.
- If approved for a plan and your income drops, request modification promptly to avoid default.
Final checklist before you apply
- File all past due returns.
- Know your total balance (tax, interest, penalties).
- Decide online vs paper; gather income/expense documents.
- Select direct debit and a realistic monthly payment.
- Keep copies of all IRS correspondence and payment confirmations.
Professional disclaimer: This article is educational and not a substitute for individualized tax advice. Tax rules and IRS procedures change; always confirm current fees, forms, and thresholds on the IRS website or consult a qualified tax professional.
Authoritative resources
- IRS — Apply for an Installment Agreement: https://www.irs.gov/individuals/apply-for-an-installment-agreement
- IRS — Understanding Installment Agreements: https://www.irs.gov/taxpayers/understanding-installment-agreements
- IRS — Online Payment Agreement Application: https://www.irs.gov/individuals/irs-online-payment-agreement-application
Related FinHelp articles
- Tax Debt Relief Options: From Installment Agreements to Offers in Compromise — https://finhelp.io/glossary/tax-debt-relief-options-from-installment-agreements-to-offers-in-compromise/
- Preparing a Financial Disclosure Package for an Offer in Compromise — https://finhelp.io/glossary/preparing-a-financial-disclosure-package-for-an-offer-in-compromise/
- IRS Installment Agreements: How to Get a Reduced Monthly Payment — https://finhelp.io/glossary/irs-installment-agreements-how-to-get-a-reduced-monthly-payment/
(Last reviewed 2025)
