IRS Payment Arrangements - Installment Agreement

by Kenneth Hoffman in ,

The Internal Revenue Service (“IRS”) is authorized to allow the full payment of a taxpayers unpaid tax debt in small and manageable monthly payment amounts.  This revolving credit arrangement is called an “installment agreement.”

 The taxpayer must satisfy the following conditions before the IRS agrees to an installment agreement:

  • Taxpayer filed all tax returns;
  • Taxpayer filed all employment tax returns;
  • Taxpayer paid all payroll taxes for the current tax quarter;
  • Taxpayer filed a financial statement (Form 433) if the tax due exceeds $25,000; and
  • Taxpayer (self employed) made estimated tax payments for the current tax year.

A one-time user fee is charged by the IRS to process an installment agreement.  Another cost associated with an installment agreement is a user fee.  The fee is currently $52 for direct debit agreements and $105 for non-direct debit agreements.

Eligible low-income taxpayers (based on the Department of Health and Human Services poverty guidelines) will be charged a $43 fee.  If taxpayers fail to meet the terms of the agreement during the life of the agreement, the IRS will charge an additional $45 fee to reinstate the agreement.  

If you arrange to pay your taxes through an installment agreement, you can pay in various ways: 

  • Personal or business checks, money orders, or certified funds (all made payable to the U.S. Treasury);
  • Payroll deductions your employer takes from your salary and regularly sends to IRS; 
  • Electronic transfers from your bank account or other similar means; or
  • Direct debit from your bank account.

If you have any questions about this topic, tax law changes, business tips, or how to become a client, please call us at 954-591-8290 or use our Contact form.