Are IRS Payment Plans Common?

This article discusses how IRS payment plans can help taxpayers avoid financial difficulties and penalties if they are unable to pay their tax debt in full. Understanding the options available for resolving tax debt is crucial to avoid serious consequences such as wage garnishment or legal action.

The article provides an overview of different types of payment plans, the application process, and the advantages and disadvantages of using this option. It also examines the prevalence of IRS payment plans and emphasizes the importance of understanding them for all taxpayers.

What Are IRS Payment Plans?

pay off their tax debt over time instead of in one lump sum. Under an installment agreement, taxpayers make monthly payments to the IRS until their debt is paid in full. This option can be helpful for those who cannot afford to pay their tax bill all at once.

There are different types of payment plans available to taxpayers depending on their circumstances:

1. Guaranteed Installment Agreement:

This type of payment plan is available to taxpayers who owe $10,000 or less and have filed all required tax returns. In order for the IRS to approve this kind of arrangement, both parties must come to a mutual understanding that the taxpayer will pay off their debt within three years.

2. Streamlined Installment Agreement:

Taxpayers who owe between $10,001 and $50,000 can apply for a streamlined installment agreement. The taxpayer has up to 72 months to pay off the debt and does not need to provide financial information to the IRS.

3. Partial Payment Installment Agreement:

This option is for taxpayers who cannot afford either a guaranteed or streamlined installment agreement. The taxpayer makes monthly payments based on what they can afford and the remaining balance is forgiven after a certain period of time.

4. Non-Streamlined Installment Agreement:

Taxpayers who owe more than $50,000 may need to provide financial information and negotiate with the IRS for a non-streamlined installment agreement.

Overall, IRS payment plans can be a useful tool for taxpayers who are unable to pay their tax debt in full immediately. It's important for individuals with tax debt to explore all available options and understand the terms and conditions of each before making a decision about how best to resolve their debt with the IRS.

How To Apply For An IRS Payment Plan?

If you are unable to pay your tax debt in full, applying for an IRS payment plan can be a good option. Here's how to apply:

1. Determine the type of payment plan you need: The first step is to determine which type of payment plan is best suited for your situation based on the amount you owe and your ability to pay.

2. Complete Form 9465: This form, also known as the Installment Agreement Request, is used to request a monthly installment plan from the IRS.

3. Submit financial information: Depending on the amount owed, taxpayers may need to submit additional financial information such as income and expenses. This information will be used by the IRS to determine eligibility and calculate monthly payments.

4. Wait for approval: Once all required forms and financial information have been submitted, taxpayers must wait for approval from the IRS.

Short-term payment plans can be set up online through the IRS website or over the phone in just a few minutes. For installment agreements that require more than 120 days to pay off, taxpayers will need to fill out Form 9465 and provide financial information.

It's important to note that interest and penalties will continue to accrue until the tax debt is paid in full, regardless of whether a payment plan has been established.

Eligibility Requirements For An Offer In Compromise

An offer in compromise (OIC) is another option available for those who cannot afford to pay their tax debt in full. An OIC is a convenient way for taxpayers to lessen their debt with the IRS without paying what they owe in full.

To be eligible for an OIC, taxpayers must meet certain criteria:

They must have filed all required tax returns.
They cannot be involved in any open bankruptcy proceedings.
The amount offered must be equal to or greater than what could reasonably be collected through other means.
The taxpayer must make all required payments while waiting for approval of their OIC application.

The process of applying for an OIC can be complex and requires careful consideration of one's financial situation. It's recommended that taxpayers seek professional guidance before pursuing this option with the IRS.

Advantages and Disadvantages Of IRS Payment Plans

IRS payment plans can be a helpful way for taxpayers to pay off their tax debt over time. However, there are also potential drawbacks to consider before entering into a payment plan.
Advantages Of IRS Payment Plans
1. Avoid penalties: By setting up an installment agreement with the IRS, taxpayers can avoid certain penalties for not paying their tax debt on time.

2. Flexibility: Payment plans offer flexibility in terms of how much is paid each month and when payments are made, allowing taxpayers to manage their finances more effectively.

3. No need to borrow money: A payment plan allows taxpayers to avoid borrowing money to pay off their tax debt or dipping into savings that may be needed for other expenses.

4. Protection from collection actions: Once a payment plan is established, collection actions such as wage garnishments or bank levies will be suspended as long as payments are made on time.

Disadvantages Of IRS Payment Plans

Interest and penalties continue to accrue: Even with a payment plan, interest and penalties will continue to accrue until the tax debt is paid in full.

1. Fees: There may be fees associated with setting up a payment plan or making payments through certain methods such as credit card payments.

2. Potential impact on credit score: Entering into a payment plan with the IRS could potentially have a negative impact on one's credit score if payments are missed or not made on time.

3. Long-term commitment: Depending on the amount owed, a payment plan could require monthly payments for several years, which may affect long-term financial planning.

It's important for individuals with tax debt to carefully consider all options available and weigh the advantages and disadvantages before deciding whether an IRS payment plan is right for them.  

How Common Are IRS Payment Plans?

Setting up payment plans with the IRS can be a great way for taxpayers to manage their tax debt in an effective and manageable way. Millions of taxpayers opt for this method each year, as IRS statistics demonstrate that over 70% of those who cannot pay what they owe choose to do so. Payment plans with the IRS allow taxpayers to still be responsible while they figure out how to get caught up on what they owe, making it a popular option when money is tight.

In addition to those taxpayers who are actively making payments on their tax debt, millions more are currently in negotiations with the IRS to set up payment plans. These taxpayers may not have formally established a payment plan yet, but are actively working with the IRS to find an acceptable payment arrangement.

Overall, payment plans and other options for resolving tax debt continue to be widely used by taxpayers who are struggling with their tax obligations.


The article concludes that IRS payment plans are common and can be a good option for taxpayers struggling to pay their taxes. It highlights the importance of understanding the process, exploring other options like an offer in compromise, seeking professional advice, and addressing tax debts quickly to avoid consequences. The article encourages taxpayers to take control of their finances by exploring payment plan options that work best for their financial situation.

© Copyright 2023 - All Rights Reserved