If you received an IRS notice showing a balance due and you can’t pay the full amount right away, federal tax rules allow you to request a monthly payment plan, commonly called an installment agreement. This is a formal arrangement in which the IRS accepts payments over time instead of requiring one lump-sum payment.
The basic idea is straightforward: once a plan is approved, you pay the debt in agreed monthly installments, and the IRS generally treats you as compliant as long as you follow the terms. Many taxpayers with a balance due can qualify for some version of this option, especially through the IRS online system.
How to Determine Eligibility
You Must Be Current on Filing (Even If You Haven’t Paid Yet)
The IRS generally will not approve an installment agreement if you have unfiled required tax returns. Filing compliance is a prerequisite before a plan can be granted.
Practical rule: if any returns are missing, file them first, then request a plan.
Your Total Balance Determines Which Plan You Can Request
Eligibility depends on your total balance due (tax, penalties, and interest combined). The IRS uses these thresholds:
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- Short-term payment plan (up to 180 days): you qualify if you owe less than $100,000 in combined tax, penalties, and interest.
- “Simple” long-term installment agreement: you qualify if you owe $50,000 or less in combined tax, penalties, and interest and are current on filing. This option is generally available through the IRS Online Payment Agreement system.
These are the limits the IRS uses for streamlined online approval in many individual cases.
You Must Stay Compliant Going Forward
Even if your balance fits the limits, the IRS requires that you stay current on future tax obligations while the agreement is in effect. That includes filing new returns on time and paying any new taxes due (such as correct withholding or estimated payments).
If you build up new unpaid liabilities during the plan, the IRS may cancel (default) the agreement.
You Must Propose a Realistic Monthly Payment
For short-term and simple online plans, the IRS often does not require a full financial review. But if you owe more than the streamlined limits or request a very low monthly amount, the IRS may require financial information to verify what you can reasonably pay. IRS collection procedures explain that eligibility and terms depend on the taxpayer’s ability to pay.
In plain terms: the IRS needs to see that your payment proposal matches your real income and necessary expenses.
Situations That Can Prevent Immediate Approval
Some circumstances typically delay or block approval until resolved:
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- An active bankruptcy case: IRS rules for collection during bankruptcy limit normal collection actions, and new installment agreements are generally not handled in the usual way while a bankruptcy is open.
- Serious prior noncompliance or a defaulted plan: If you previously had an installment agreement and defaulted, the IRS may require additional steps or closer review before granting a new one.
Why Knowing Early Matters
Understanding whether you qualify helps you avoid two common risks. First, waiting too long without taking action can lead the IRS to restart collection steps when no plan is pending or active.
Second, it prevents you from applying the wrong way. If you qualify for an online plan, the IRS states that the Online Payment Agreement is the fastest method and often carries lower user fees than applying by mail or phone.
Knowing your eligibility also helps you budget for a monthly amount you can maintain, so the agreement stays in good standing.
A Checklist to Confirm Eligibility
In practical terms, you are likely eligible for an IRS installment agreement if:
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- All required tax returns have been filed.
- Your total balance is under $100,000 for a short-term plan, or $50,000 or less for a simple long-term plan.
- You can make realistic monthly payments and remain current with future tax filings and payments.
If you meet these requirements, the IRS online system will usually allow you to set up a formal payment plan. If you do not meet one of them, it does not mean you have no options—it means your request may require a different plan type and additional review. Acting early and using the correct IRS process is the best way to protect yourself and resolve your tax debt steadily and legally.
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