IRS Streamlined Installment Agreement — How to Qualify and Apply

With so many forms of tax relief available, finding the right option for your situation can be a challenge. If you’re looking for a solution that allows you to apply and get set up immediately without having to provide extensive financial information, you may be interested in a streamlined installment agreement. Streamlined installment agreements are available to taxpayers with $50,000 or less in tax debt.

Learn more about streamlined payment plans and find out how Stephen B. Kass, P.C. can help you get back on track.

Key Takeaways

• The IRS streamlined installment agreement is for taxpayers owing $50,000 or less and businesses owing $25,000 or less.
• Individuals get up to 72 months to pay, businesses get up to 24 months.

• Direct debit payments may be required if you owe more than $25,000 ($10,000 for businesses).
• Installment agreements can help you avoid liens and other collection actions.
• Stephen B. Kass, P.C. helps clients apply for and negotiate these agreements to avoid costly penalties.

Who Qualifies for a Streamlined Installment Agreement?

Both individual taxpayers and business taxpayers can qualify for streamlined installment agreements. To qualify, taxpayers must be current on all required tax filings and estimated tax payments. Accounts in all statuses may qualify, including those that have received notices, those that have balances due, and those that are still in pre-assessment.

For individuals, the IRS separates these agreements into two categories: balances of $25,000 or less and balances of $25,001 to $50,000. If you owe over $25,000, you must set up direct debit for the payments, but if you owe under $25,000, you can opt to mail in your payments or pay online every month. In either case, you must be able to pay off the balance with monthly payments within 72 months or by the Collection Statute Expiration Date—whichever is sooner.

Anyone owing more than $50,000 generally cannot qualify for a streamlined installment agreement—however, they may be able to if they first pay down their tax debt below the threshold. Also, there are some exceptions to this rule – for instance, for several years after the COVID-19 pandemic, the IRS granted streamlined agreements to taxpayers with higher levels of tax debts.

Businesses may be able to qualify for a streamlined arrangement called an in-business trust fund express installment agreement. They must owe less than $25,000, and if they owe more than $10,000, they must set up direct debit. Additionally, businesses must be able to pay everything off within two years. The rules vary for sole proprietorships that are no longer in operation.

Benefits of Streamlined Installment Agreements

There are multiple benefits offered by streamlined installment agreements.

• Reduced penalties – setting up a payment plan drops your failure-to-pay penalty from 0.5% to 0.25%, significantly slowing the rate of growth.
• No financial disclosure – additionally, you don’t have to go through an extensive financial disclosure process, as you do with some other types of installment agreements. This is a huge benefit for many taxpayers, as the time and work involved in identifying and listing your debts, assets, income sources, and other obligations can be overwhelming.
• No tax liens – A streamlined installment agreement generally allows you to avoid a Notice of Federal Tax Lien. If a lien has already been issued, the IRS may be willing to remove it after you make three months’ worth of payments.
• Fast approval – Compared to other types of installment agreements, streamlined options offer much quicker turnaround time. Because the IRS does not have to go through your collection information statement and determine whether or not you can afford an installment agreement, you can get on the path to repayment sooner and get this burden off your shoulders. If you apply online, you can get approved instantly.

How to Apply for a Streamlined Installment Agreement

While most taxpayers prefer to apply for a streamlined installment agreement online, you can also apply over the phone or by mail. To make sure you’ll get approved, you can either call the IRS or log into your online account to verify that you are up-to-date on your tax returns and that you owe less than $50,000.

Applying Online

Applying online is easy. You can log on to the IRS website with ID.me, and then fill out the required information on the Online Payment Agreement Tool. You’ll need to verify that you can pay the monthly payment amount and agree to the terms of an installment agreement, which include paying future taxes on time and filing tax returns on time.

You can also choose a monthly due date between the 1st and 28th of each month. If you owe less than $25,000, you will have the option to set up direct debit payments with Form 433-D. If you owe more than $25,000, direct debit payments are required to avoid a federal tax lien. After you hit submit, you will receive an automatic decision from the IRS.

Applying by Mail

If you would rather apply by mail, you can print out Form 9465 and send it to the included address. This process does take a bit longer, as the IRS must receive and process the application before a decision is made. Then, the IRS will mail you a letter once you’re set up. To avoid collection actions, make monthly payments while you wait for a response.

Applying on the Phone

If you would rather apply over the phone, you can call 800-829-1040. Have all of your relevant documents, account numbers, and forms handy to speed up the process. Consider filling out Form 9465 and then giving the IRS employee the info over the phone. Have a copy of your last tax return on hand – the IRS may ask you questions about that return to verify your identity.

Streamlined vs. Guaranteed Installment Agreement

Guaranteed installment agreements are only available to those who have $10,000 or less in tax debt and are able to pay it off in full in three years. If you have a history of tax compliance and you meet those two criteria, approval is guaranteed.

Like streamlined installment agreements, guaranteed agreements do not require a financial information form. Streamlined installment agreements offer longer repayment terms and higher debt limits.

The Role of Direct Debit in Streamlined Agreements

You’ll hear the phrase “direct debit” a lot when you talk about streamlined installment agreements. The IRS wants to ensure full and timely payments whenever possible, and direct debit agreements are a simple way of doing that.

Streamlined installment agreements generally require direct debit payments for debts over $25,000. However, those owing less than $25,000 are still encouraged to set up direct debit payments. With a direct debit agreement, you can avoid a federal tax lien and ensure that your payment is on time every month—no tracking due dates or manually setting up payments.

As an added benefit, agreeing to direct debit payments can save you money during the application process. If you apply online, it’s $22 for direct debit agreements and $69 for non-direct debit agreements. This increases to $107 and $178 respectively for phone or mail applications.

What if you don’t have a bank account?

If you don’t have a bank account, you can use payroll debits instead of direct debits from your account. In this situation, the IRS sends your employer a notice, and then, they withhold the monthly payments from your paycheck and send the money to the IRS on your behalf.

Alternatives to Streamlined Installment Agreements

While streamlined installment agreements are a convenient option for many taxpayers, they are definitely not a one-size-fits-all solution. If you calculate your monthly payment by dividing it by 72 and the amount does not fit within your budget, a streamlined agreement may not be for you.

A monthly payment that tests the limits of your budget can put you in a worse position down the line when you miss payments and default on the installment agreement. If you don’t think you can afford the minimum monthly payment or you owe more than $50,000, consider these options:

• Partial payment installment agreement: If you can afford monthly payments but not the full monthly payment, a PPIA may be a good fit for you. This option does require a full financial disclosure, and the IRS may require you to return to a regular installment agreement if your financial situation changes.
• Offer in compromise: This option also requires an in-depth financial disclosure. A successful offer in compromise allows you to pay off your debt for less than you owe, and the IRS only wants to explore that option if you genuinely don’t have enough assets or income to pay in full or make payments.
• Currently not collectible status: If your financial situation doesn’t have any wiggle room in it for payments, the IRS may consider you currently not collectible. This is temporary, and if the IRS believes you are able to resume payments, they may again start collection activities.
• Paying down the debt: This may be an option if you want a streamlined installment agreement but owe more than $50,000. If you can get your total debt below $50,000, you can then apply for a streamlined agreement.
• Non-streamlined installment agreements: A standard installment agreement may still be suitable for you if you owe more than $50,000 but can afford the minimum monthly payments. While you do have to fill out a collection information statement, you can enjoy the convenience of predictable monthly payments.

Consequences of Not Applying for a Streamlined Agreement

When faced with tax issues, too many people put off important decisions that could save them time, money, and stress. If you decide not to apply for a streamlined installment agreement and don’t take any further action on your tax issues, you risk several negative outcomes.

• Collection actions – The IRS will continue pursuing the taxes you owe by whatever means they can. This may include garnishing your wages, placing a lien on your assets, seizing the funds in your bank account, or levying your assets and selling them to pay off your tax debt. These outcomes can put you in a far worse financial situation than you were in when you just had the tax debt to deal with.
• Interest and penalties – While you’re making your decision and the IRS is planning its next steps, interest and penalties continue to accrue. The more you owe, the more this will affect your finances—interest is charged on your entire tax debt, penalties and previous interest charges included. Since interest accrues daily, your balance can increase very quickly if you do not take action.
• Assignment to revenue officer – Your case may also be assigned to a Revenue Officer. The more you owe, the more likely it is that a Revenue Officer will take over your tax file. This often leads to faster and more aggressive collection actions. It may also limit your repayment options, as the IRS wants you to exhaust all of your current resources before considering a payment plan.

How the Law Offices of Stephen B. Kass, P.C. Can Help

At Stephen B. Kass, P.C., we understand the stress you’re under because of your tax debt. The IRS has a bad reputation for its persistence, and if you wait too long to take action, they may pursue more aggressive collection actions against you.

We can help you with the installment agreement application process to ensure that you benefit from a timely and accurate submission process. If you do not qualify for a streamlined installment agreement, we’ll work closely with you to look into other options that may suit your needs.

If you’re struggling to decide on a payment plan that fits your budget and goals, our team can work directly with the IRS to negotiate a payment that accommodates your financial situation. In doing so, we focus on avoiding liens, levies, wage garnishments, and other negative outcomes. Getting into compliance as quickly as possible can bring you relief.

Don’t risk penalties or liens from unpaid taxes. Contact the Law Offices of Stephen B. Kass online or call us at 212-843-0050 to find out how we can help you get back on track.