How Long Are IRS Payment Plans for Back Taxes?

The IRS gives most taxpayers up to 10 years to pay off tax debts – as long as the debt is paid before the collection statute expiration date. However, many installment agreements are for shorter amounts of time. Ultimately, it depends on how much you owe, what you can afford to pay, and the type of payment plan you get.

This post explains how many months the IRS gives you to pay in certain scenarios. Contact Wiggam Law today for help setting up a payment plan.

Key takeaways

• The IRS offers payment plans ranging from 180 days to 10 years.
• Short-term payment plans – 180 days with no monthly payments.
• Guaranteed payment plans – up to 3 years.
• Simple payment plans – up to 10 years or until the Collection Expiration Date if sooner.
• Non-streamlined payment plans – up to 10 years or the Collection Expiration Date if sooner.

Why the IRS Offers Different Payment Plans

The IRS offers a variety of installment agreements to meet the different needs of taxpayers. Plans vary based on the amount due, the repayment term, and required paperwork.

How long do IRS payment plans last?

IRS installment agreements can last from 180 days to 10 years. The type of payment plan and the monthly payments you make determine the length of your IRS payment plan.

Let’s take a look at the different types of IRS installment agreements. Note that if the tax debt expires before the repayment term ends, you may have to pay off the balance by the collection statute expiration date (CSED).

Short-Term Payment Plan

Consider this option if you can pay in full within six months of filing your tax return.

• Repayment term: 180 days
• Eligible taxpayers: Individuals
• Maximum tax debt allowed: $100,000
• Application process: Apply online or call the IRS.
• What to expect: No setup fees. No monthly payments required. As long as you pay in full within 180 days, the IRS will not file a tax lien.

Guaranteed Installment Agreement

Consider this option if you owe $10,000 or less, can pay off the balance within three years, and have a history of compliance with tax regulations.

• Repayment term: 3 years (36 months)
• Eligible taxpayers: Individuals
• Maximum tax debt allowed: $10,000
• Application process: Apply online, call the IRS, or mail Form 9465.
• What to expect: Guaranteed approval if you normally pay and file on time. No financial disclosure required. No lien filed.

Simple Installment Agreement for Individuals

This option is typically the most popular IRS installment agreement.

• Repayment term: Up to 10 years
• Eligible taxpayers: Individuals
• Maximum tax debt allowed: $50,000
• Application process: Apply online, call the IRS, or mail Form 9465.
• What to expect: The IRS approves most requests for simple payment plans, but to keep your plan in good standing, you must file returns on time and pay estimated quarterly tax if applicable. The IRS generally does not file a tax lien once you set up payments, but if the agency filed a tax lien before you set up payments, you can ask to have it withdrawn after the third monthly payment if you owe less than $25,000 and set up payments over five years or less.

In-Business Trust Fund Express Installment Agreement

This payment plan is only available for payroll or federal unemployment tax, not corporate income tax.

• Repayment term: Up to two years (24 months)
• Eligible taxpayers: Businesses that owe payroll or federal unemployment taxes
• Maximum tax debt allowed: $25,000
• Application process: Apply online or call the IRS.
• What to expect: The IRS generally will not file a tax lien, but you must set up direct debit payments if you owe over $10,000. You must file and pay all future payroll tax returns on time to keep your plan active. However, if you incur new payroll taxes, the IRS will let you roll them into this payment plan if you owe less than $10,000 and can pay off the balance within the original time frame.

Streamlined Installment Agreement

The streamlined option lets qualifying businesses set up payments for up to six years on back taxes.

• Repayment term: Up to six years (72 months)
• Eligible taxpayers: In-operation businesses that owe up to $25,000 in non-payroll tax debt, or out-of-operation businesses that owe up to $50,000 in any type of tax debt.
• Maximum tax debt allowed: $25,000 or $50,000, subject to certain conditions.
• Application process: Apply online or call the IRS.
• What to expect: You don’t have to provide a financial statement if you meet the criteria and are compliant with filing returns and making estimated payments or payroll deposits. Sole proprietors without employees can apply for individual payment plans, which means that you may be able to get more time or qualify to make payments on a higher balance.

Non-Streamlined Installment Agreement

Taxpayers who don’t qualify for the above options may need to consider a non-streamlined installment agreement, or NSIA. This option is available for longer terms and higher balances than noted above.

• Repayment term: Up to the Collection Expiration Date – typically 10 years after the tax was assessed or the return was filed
• Eligible taxpayers: Individuals and businesses
• Maximum tax debt allowed: Up to $250,000
• Application process: Apply online, call the IRS, or mail Form 9465. Individuals should complete Form 433-F if applying on their own or Form 433-A if working with a revenue officer. Businesses should complete Form 433-B.
• What to expect: You must provide detailed financial information through a collection information statement (CIS) and proof of income and expenses. The IRS will generally file a tax lien, and you must file all returns and make all tax payments on time to keep your agreement in good standing.

Partial Payment Installment Agreement

A partial payment installment agreement (PPIA) is for taxpayers who cannot afford the minimum monthly payment for any of the above options. If you get approved, you make payments until the tax debt expires, and then the IRS writes off the remaining balance.

• • Repayment term: Up to the Collection Expiration Date – typically 10 years after the tax was assessed or the return was filed
  • Maximum tax debt allowed: No limit
  • Application process: Apply online, call the IRS, or mail Form 9465. Complete Form 433-F if applying on your own or Form 433-A if working with a revenue officer.
  • What to expect: The IRS will base your monthly payment on your disposable income as detailed in the collection information statement. Every two years, the IRS will check your financial situation, and if you have extra disposable income, they may expect you to make larger payments or switch to one of the above payment options. If you stay on the PPIA until the collection expiration date, the remaining tax debt will expire.

How to Decide Which Plan Is Right for You

To ensure you pick the right plan for your needs and that you give yourself enough time to pay back the debt, consider:

• How much can you afford monthly? The amount you owe divided by the amount you can afford to pay every month gives you a rough idea of how much time you need to pay back your tax debt — round up to cover interest.
• Do you want to avoid the financial disclosure? If you owe more than $50,000 or can’t pay off the debt by the expiration date, you may need to make a detailed financial disclosure. Generally, the only way to avoid that is by paying down the debt and/or figuring out how to pay it off by the CSED.
• Can you commit to direct debit payments? Businesses must set up direct debit for anything over $10,000. If you can’t do that, you’ll need to provide a financial disclosure. Individuals may need to set up direct debit if they have a history of defaulting on payment plans.
• How will your repayment plan affect the rest of your finances? If you apply for a mortgage or a business loan while on an IRS installment agreement, the lender will consider your monthly payments and your debt when calculating your debt-to-income ratio and similar metrics. Keep that in mind as you choose a repayment term — in some cases, you may want to make larger monthly payments so that you get out of debt faster.
• Can you stay on top of future tax obligations? Whether you gravitate toward a six-month, a three-year, or a longer repayment term, consider how those monthly payments will affect your ability to stay on top of future tax obligations. One of the requirements of an IRS installment agreement is that you don’t incur new debt – but in some cases, the IRS will let you roll new debt into an existing payment plan.

Also, keep in mind that interest accrues while you’re on a payment plan, and the longer your repayment term, the more interest you will pay.

Risks of Choosing the Wrong Plan

Choosing the wrong plan can increase your risk of default, especially if you commit to a short-term plan with high monthly payments. However, if you drag out repayment too long, you may have to provide a financial disclosure, which is time-consuming and complicates the application process.

To be on the safe side, choose a plan that gives you an affordable monthly payment and, if possible, doesn’t require you to file a collection information statement. Then, just make extra payments every month so that you can get it paid off faster. If needed, you may be able to modify your original agreement.

When to Contact a Tax Professional

Sometimes, it’s easy to set up an IRS payment plan – in other cases, you should consult with a tax professional to ensure you make the best choice for your situation. Consider contacting a professional if:

• You owe more than $50,000.
• The IRS has sent a Final Intent to Levy, and you want help protecting your assets.
• You can’t pay off the debt by the collection expiration date.
• The Collection Statute Expiration Date is approaching, and you want to know how to leverage it to your advantage — the IRS cannot legally collect tax debt after the CSED.
• You can’t afford the minimum monthly payment on a standard installment agreement and want to talk about a partial payment installment agreement.
• You want to see if you’d qualify for a settlement (offer in compromise).
• You’ve defaulted on a previous payment plan.
• You need help requesting penalty abatement.
• You don’t want to deal with the IRS on your own.

Frequently Asked Questions

How long will the IRS give me to pay off $10,000?

The IRS will give you until the collection expiration date (10 years after assessment) to pay off the tax debt if needed, but there’s a lot of paperwork involved if you want that long to pay. If you don’t file a financial disclosure, the IRS gives you up to 10 years to pay off the tax debt. There’s a three-year repayment plan with guaranteed acceptance for taxpayers who owe up to $10,000 and normally pay their taxes on time.

Can I get a 72-month plan without showing financials?

Yes, if you owe less than $50,000, you can get up to 120 months to repay individual taxes, without providing a financial disclosure. Businesses can get up to 72 months to pay without providing financial details if they owe less than $25,000 in non-payroll tax debt or if they’re out of business and owe less than $50,000 in tax debt.

What happens if I owe more than $50,000?

You must make a payment to get your tax debt below $50,000, or you may need to submit a financial disclosure when applying for a payment plan of any length. The only exception is if you can pay within six months – then, you can set up a short-term 180-day payment plan on any level of tax debt up to $100,000.

Note that the IRS installment agreement request form says that you have to provide financial details if you owe over $50,000, but in practice, the IRS may not require a financial statement unless you owe over $250,000, a revenue officer has been assigned to your case, or you have a history of default.

Will the IRS always approve my payment plan?

No, the IRS does not approve all payment plans. However, if you owe under $50,000, you can pay off the balance within 10 years or by the CSED if sooner, and have a history of compliance, the agency will usually automatically accept your payment plan.

Can I change plans if my financial situation changes?

Yes, you can modify IRS payment plans, but depending on the requested changes, you may need to provide additional paperwork.

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Sources:
https://www.irs.gov/newsroom/irs-payment-plan-options-fast-easy-and-secure
https://www.irs.gov/payments/payment-plans-installment-agreements