It is possible to set up a payment plan that may extend for up to seven years in the right situation
under the IRS’s Fresh Start program. The two key factors that determine if the IRS is to work
with you under this program are how much you owe and what type of tax debt you have.
Entering into payment plans with the IRS require you to agree to certain future conditions, and
should be monitored by you or the professional you hire to help you put together a payment plan
proposal to the IRS.
An installment agreement allows you to make monthly payments to the IRS for the tax debt you
owe. The amount of the payment is based on how much you owe, and is usually completed in 5
years. There may be a high amount of scrutiny placed on your household income and expenses if
you owe more than $50,000.
Offer in Compromise
In an offer in compromise, you are basically saying to the IRS that your household budget
doesn’t support a monthly payment plan for several years, but you can propose a shorter or
smaller payment to resolve the tax debt. An information package you put together and provide to
the IRS has to support your lack of ability to make payments and the IRS has to accept your
Partial Payment Installment Agreement
Generally, installment agreements are designed to pay the full amount you owe by the end of the
agreement. Sometimes, it is possible to propose a plan that makes payments for several years, but
the total paid over the course of the plan is less than the total amount owed. This type of
agreement is called a partial payment installment agreement.
Direct Deposit Installment Agreement
A direct deposit installment agreement is slightly different from other installment agreements, not
because of the amount you pay, but because of how you agree to make the payments. In other
installment agreements, you can send in the monthly payments to the IRS by cashier’s check,
money order, or bank draft. In a direct deposit installment agreement, a part of the agreement is
you agree that the IRS can take the monthly payments directly out of your bank account each