Updated October 22, 2024
Streamlined Installment Agreements allow taxpayers to set up monthly payments on tax debt without providing a financial statement. This allows them to get approved more easily and get back on track more quickly.
This particular payment option is part of the IRS Fresh Start Initiative, a collection of tax relief options developed to help taxpayers control their taxes. These options include various installment agreements, the offer in compromise, and penalty abatement.
If you’re considering a Streamlined Installment Agreement to pay off your tax debt, learn more about the benefits, the application process, and what to expect throughout the duration of your agreement.
What is a Streamlined Installment Agreement?
Streamlined Installment Agreements help taxpayers get approved for payment plans without providing financial statements and details, making it easier to begin monthly payments and get one step closer to being free of tax debt. Each plan has different debt caps, and payment terms require full payment of the taxes owed. No Collection Information Statement is required, nor is a Notice of Federal Tax Lien.
How It Compares to Other Payment Plans
In addition to streamlined options, taxpayers may consider several other types of installment agreements. Guaranteed installment agreements are only available to those who owe $10,000 or less and must be paid off within three years.
In comparison, Streamlined Installment Agreements may last 72 months or until the Collection Statute Expiration Date (“CSED”), whichever is earlier. And you can qualify for a streamlined plan if you owe up to $50,000.
The other main option available to taxpayers is the standard installment agreement. This does not have a capped debt amount, so you can qualify even if you owe substantially more than $50,000. Taxpayers must provide a Collection Information Statement, and the monthly payment amount is based on their available assets and ability to repay the IRS through monthly cash flow. In most cases, the IRS will likely place a lien on their assets until payment is made in full.
Eligibility Criteria
While Streamlined Installment Agreements are a convenient and time-saving option for many taxpayers, they are not available to everyone. You must meet certain qualifications to get approved for a Streamlined Installment Agreement.
Key requirements include:
- Unpaid balance, including tax, penalties, and interest, is $50,000 or less.
- Must be able to make the minimum monthly payment, calculated by taking the total unpaid balance and dividing by 72.
- Must be able to pay the balance off within 72 months or by the Collection Statute Expiration Date, whichever comes first.
- Must be current on all required tax return filings.
- Must be up-to-date on all required estimated tax payments.
Types of Streamlined Installment Agreements
There are two categories of Streamlined Installment Agreements. If you do not fit into either one of these categories, you will likely need to look into a standard or partial payment installment agreement.
Category 1
The first category of SIAs is reserved for those who owe $25,000 or less in taxes. While the IRS generally recommends direct debit payments for any installment agreement, direct debit is not required for this type of Streamlined Installment Agreement. Your monthly payment will typically be the total unpaid balance divided by 72 unless the CSED is less than 72 months away. In that case, the minimum payment will be the total unpaid balance divided by the number of months left until the CSED.
Category 2
Those who owe between $25,001 and $50,000 may qualify for this type of installment agreement. The payment calculation is the same as it is for those in the first category. However, the IRS does require direct debit payments for those who owe this much and want a Streamlined Installment Agreement. If you owe in this range and don’t want to set up direct debits, you can still potentially get a payment plan; you must fill out a collection information statement.
Exceptions
Perhaps you are just over the cutoff for a Streamlined Installment Agreement (“SIA”), but you would rather apply for an SIA than go through the time and paperwork associated with a standard installment agreement. If you qualify, you may wish to look into penalty abatement.
The IRS may be willing to forgive some of your penalties if you have previously been compliant with all tax filing and payment requirements, and that relief may be enough to bring you down below the threshold. You may also be able to make a lump sum payment on your tax debt that brings you down below the $25,000 or $50,000 threshold and allows you to qualify for a Streamlined Installment Agreement.
Benefits of Streamlined Installment Agreements
SIAs provide a wide range of benefits to taxpayers, including:
- Simplified application process. Since you do not have to provide detailed financial information, you can apply quickly and find out whether or not you’re approved. This can be a big relief for taxpayers who have had tax debt looming over their heads for months or even years.
- No financial disclosure. Financial disclosure can be a significant amount of work for many taxpayers, particularly those who have assets that may otherwise disqualify them from an installment agreement. Not filling out a Collection Information Statement can save time and stress for applicants.
- End to other collection actions. Avoiding the risk of a lien or levy is a huge benefit for taxpayers, and a Streamlined Installment Agreement may prevent more aggressive collection actions as long as you stay up-to-date on payments.
- Long repayment period. With up to 72 months to pay, a SIA can help taxpayers tackle their tax debt with reasonable monthly payments.
- Easy to remain compliant. Whether or not your SIA requires direct debit payments, the option to set up direct debit payments makes it much easier to ensure that every payment is made on time to avoid default.
How to Apply for a Streamlined Installment Agreement
If you want to request a Streamlined Installment Agreement, you may be able to do so online or with Form 9465. Applying online is generally preferred by taxpayers, as it allows for an immediate decision from the IRS and allows you to set up direct debit payments right away.
The IRS Online Payment Agreement system requires you to verify your identity via ID.me, at which point you can proceed with your application and get a decision right away. Note that online payment agreements have lower set-up fees, which is another reason that online applications are more popular among taxpayers.
Before you begin the application process, ensure you meet all the eligibility criteria. You must be under the balance due cap for an SIA—there’s no real wiggle room if you’re only a little bit over. Once you’ve verified that you qualify, you can log in via ID.me and complete the online application process. You’ll need to provide your personal information and information about your tax debt.
Form 9465 and 9465-FS
If you would rather apply via mail, you can apply with Form 9465 or Form 9465-FS.
Both of these forms allow you to request an installment agreement, although 9465-FS is generally reserved for taxpayers who owe more than $25,000 but less than $50,000. After providing your personal information, you must fill out the total amount of taxes you owe and calculate the minimum monthly payment. You can also select your payment date and provide direct debit information.
You may need to provide more information on Form 9465 if you have defaulted in the last 12 months, owe between $25,000 and $50,000, and cannot afford the minimum payment as listed on the form. Form 9465-FS requests more information if you owe between $25,000 and $50,000.
Tips for Success
When you calculate your monthly payment, either on your own or with the IRS’ payment calculator tool, make sure that the proposed amount is realistic for your budget and ability to pay. You don’t want to request a payment below the minimum amount, as that will result in the denial of your application; remember, you must be able to pay off the debt within 72 months or by the CSED, whichever is sooner.
However, you also don’t want to agree to a high monthly payment you cannot reasonably afford. If making the payment means skipping out on groceries, delaying other bills, or consistently working more than you can physically handle, you may want to look into other payment options.
Common Mistakes to Avoid
A Streamlined Installment Agreement can be an excellent tool to get caught up on tax debt and avoid a lien or levy. Still, certain mistakes can leave you with an overly ambitious payment or lead to default, putting you in the same position you started in. As you work through this process, avoid these common errors:
- Not setting up direct debit. While there are some situations in which direct debit is not the best choice, most taxpayers do benefit from direct debit payments. This option ensures that you make payments on time every single month, which protects you from the most common cause of default (missed payments). Additionally, direct debit payments can save you money on application and setup fees.
- Choosing a payment that’s too high. Payments that aren’t practical for your budget put you at significant risk of default. If that happens, the total amount you owe becomes due immediately, and the risk of levy or lien is back on the table. It’s better to spend some time talking to a tax pro to find out if another payment solution may be better for you.
- Ignoring the CSED. Most taxpayers have 72 months to pay their tax debt off with a Streamlined Installment Agreement. However, if there are fewer than 72 months left until your Collection Statute Expiration Date, you have less time to pay the debt in full. You will need to use that date to calculate the monthly payment amount.
- Failing to follow up. If you apply online, you should get a decision immediately. However, if you apply via mail, you may need to follow up with the IRS to verify that your application has been received and processed. It’s easy to submit a form and then forget about it, but if you do that when you owe taxes, you could end up with a lien or levy. Following up regularly gives you time to intervene if your application was lost in the mail or had errors.
- Ignoring IRS communications. The IRS may continue to send you notices after you submit your application. Do not just assume that everything is fine because you’ve requested an installment agreement; read each notice thoroughly and get back in touch with the IRS if necessary to avoid liens and levies.
What Happens After Approval?
After your SIA is approved, the IRS will send you a notice monthly reminding you of your next payment and the amount you owe. However, those who opt for direct debit will not receive this monthly notice. You will simply receive an annual statement indicating how many payments you have made over the past year and how much you have left until your debt is paid off.
Payment Process
If you opt-in to direct debit payments, the IRS will begin your payments on the date you select after your application is approved. Payments will continue until your tax debt is paid off. If you do not select direct debit, the IRS will send you a notice every month reminding you of your due date and amount due. You can then make your payment online, via check or money order, or via EFTPS.
Monitoring Your Agreement
You can monitor your installment agreement online by logging into your IRS account. This allows you to change your monthly payment if you are paying more than the minimum monthly, adjust your due date, and change the account you pay from. Note, however, that with some requested IA changes, you may need to contact the IRS and speak with an employee.
Alternatives If You Don’t Qualify
If you cannot afford the monthly payment required to pay off your tax debt by the CSED or within 72 months, a Streamlined Installment Agreement may not be the best option for you. You may want to talk to a tax professional about other options, including:
- Partial payment installment agreement: This payment option requires you to make monthly payments until the Collection Statute Expiration Date, although those payments are smaller than the minimum needed for a standard or streamlined plan. You make monthly payments until the CSED, and any remaining tax debt is written off at that point.
- Offer in compromise: If you’re interested in settling your tax debt for less than you currently owe, an offer in compromise may be a viable option. This option requires a lot of paperwork, and the IRS will need to know virtually every detail about your finances.
- Currently not collectible: Those who find themselves in a temporary financial bind may qualify for currently not collectible status, which stops collection actions until a taxpayer’s financial situation improves.
Note that these options require substantially more work and documentation than a Streamlined Installment Agreement. You will need to provide a Collection Information Statement, as the IRS wants to ensure that it only offers these options to those who exhibit financial need.
If you qualify for a Streamlined Installment Agreement, you may benefit from a quicker application process, freedom from a Collection Information Statement requirement, and convenient payment options. However, it’s important to remember that this isn’t the only option available to you.
We know that navigating tax issues can be overwhelming, and we’re here to help you find the best payment solution for your needs. Schedule a consultation with our team or call us at (404) 233-9800.