The IRS can accept payments for unpaid taxes, penalties, and interest through an installment agreement for the full amount or, if your financial situation shows you cannot pay the full amount, it can accept monthly payments for the time left on the statute of limitations on collections, even if these payments will not total the full amount owed.
Guaranteed Installment Agreement. If your individual income tax liabilities are $10,000 or less (exclusive of penalties and interest), you may be guaranteed an installment agreement (IA.)
Streamlined Installment Agreement. If your aggregate unpaid balance of assessment (SUMRY) is equal to $25,000 or less or $25,001 to $50,000, you may qualify for a streamlined installment agreement. The unpaid balance of assessment includes tax and assessed interest and penalties. It does not include accrued interest and accrued penalties. The benefit of qualifying for a streamlined installment agreement is that you need not provide detailed financial information and you will be allowed to pay the obligation in 72 monthly payments, assuming that much time is left on the statute of limitations on collections.
If you owe $25,000 or less, you can make payments monthly and no Notice of Federal Tax Lien (NFTL) need be filed. If you owe from $25,001 to $50,000, the payments must be made by Direct Debit for no NFTL to be filed.
Non-Streamlined (Expanded) Installment Agreement. The IRS can also offer a non-streamlined installment agreement if the taxpayer is dealing with the Automated Collection System (ACS) or an Appeals Officer (usually in a CDP or Equivalent Hearing) with higher limits and easier than normal documentation requirements. The original “expanded” program was created in 2016 and included liabilities up to $100,000 payable over 84 months. On March 1, 2020, the IRS created a program to ease paperwork and allow more flexibility to get non-streamlined installment agreements up to $250,000 without financial verification, if your case has not been assigned to a Revenue Officer.
Full Pay or Partial Pay Installment Agreement. If you do not qualify for a “guaranteed” IA, a “streamlined” IA, or an “expanded non-streamlined" installment agreement, you can still negotiate a “full pay” or “partial pay” IA. The terms of these agreements will depend on your financial circumstances. The IRS will ask you to present details of your finances using a Form 433-F or Form 433-A, for individuals, and a Form 433-B, for businesses. The IRS will allow you what it considers “reasonable and necessary” monthly living expenses, or in the case of your business, reasonable and necessary business expenses, and then expect you to pay the remaining income, if any, to the IRS.
Currently Not Collectible. If, individually, you have no excess income after the allowance for reasonable and necessary monthly living expenses, the IRS can classify your account as “currently not collectible” (CNC).
Offer in Compromise. Regardless of your ability to pay, the IRS can consider an Offer in Compromise if you offer to pay more than the IRS calculates it can collect from you within the statute of limitations on collections. You can find more information on the Offer in Compromise in a separate blog post.
Minnesota Department of Revenue (MDR). The MDR also allows payment plans, but it does not have specific payment plan guidelines. It loosely follows some of the IRS guidelines, but it determines the appropriateness of an installment plan for each case based on the certain factors. See the MDR Fact Sheet, Installment Payment Plans, for these factors.
Don't let the IRS or the MDR force you into an IA if it is not workable. Work with the agency to arrive at a plan that has a real chance of success.