Many taxpayers who owe a substantial debt to the IRS are unable to pay it all in one lump sum. To help individuals get back on their feet, the IRS offers the option to pay your debt in monthly installments over time. However, there are some conditions.

First, to qualify for an installment agreement, you must be current on all your tax returns. If you have any past returns that have not been filed, you will not qualify. In addition, if you are self-employed, you must also be current on all your quarterly estimated tax payments.

If you are current on everything and your tax debt is $50,000 or less, you can usually receive an installment plan just by asking the IRS. If your debt exceeds $50,000, it will be more difficult. You will likely need to negotiate with the IRS and get them to agree to your plan.

There are three general types of installment plans the IRS provides: guaranteed, streamlined, and discretionary.

Guaranteed Installment Plans: A guaranteed installment plan is the best arrangement for the taxpayer because it “guarantees” that the IRS will not place a federal tax lien on your assets. A federal tax lien can be a huge black mark on your credit, and in worst case scenarios, it can also lead to eventual asset seizures. In other words, this is something you want to avoid if at all possible.

There are several conditions that must be met to qualify for a guaranteed installment agreement. You must have:

• A tax debt of $10,000 or less (this does not include penalties and interest).
• Not utilized a previous installment plan for at least the past five years.
• Filed correct returns and paid all taxes for at least the past five years.

Streamlined Installment Plans: If you do not meet the qualifications for a guaranteed installment plan, the next best option is a streamlined plan. To meet the criteria for a streamlined installment agreement, you must have:

• A total tax debt (penalties and interest included) of less than $50,000.
• A debt you can agree to pay in full in 72 months or less.

You can still receive a guarantee the IRS will not place a federal tax lien on your assets if you agree to have your monthly payments automatically withdrawn from your bank account.

Discretionary Installment Plans: If you have a tax debt that exceeds $50,000, you will need to negotiate a discretionary agreement. This means you submit a proposal to the IRS describing how you intend to pay and why it is in their best interest to agree to it. You will also need to provide detailed financial information along with your proposal to have any hope of it being accepted.

The IRS has a long list of rules and regulations regarding when and under what conditions they will accept a discretionary agreement. Ultimately, it comes down to the “discretion” of the person reviewing your file. If you are in the position where you must negotiate with the IRS, it is always best to work with a tax professional that is familiar with their procedures and what needs to be included for your proposal to be accepted.