Can You Really Afford an IRS Installment Agreement? 3.4 Million New Plans Raise Big Questions
Can You Really Afford an IRS Installment Agreement? 3.4 Million New Plans Raise Big Questions
What We Are Seeing: 3.4 Million New IRS Installment Agreements—But Can Taxpayers Afford Them?
According to the American Society of Tax Problem Solvers, the IRS established 3,403,214 new installment agreements in the most recent reporting period. That’s a staggering number—proof that taxpayers across the country are turning to payment plans when they can’t pay their full tax bill up front.
But here’s the real question:
Can taxpayers actually afford these installment agreements?
And just as important:
Are they the best solution? Installment Agreements: The IRS’s Default Tool
When a taxpayer owes and can’t full pay, the IRS often steers them into an installment agreement—a monthly payment plan for the debt.
But while these agreements stop immediate collection actions like levies, they’re far from a silver bullet. Pros and Cons of IRS Installment Agreements
The Pros:
- Collection pauses: Once your agreement is active, the IRS will typically stop active levies.
- Structured payments: A set amount monthly may help you manage the debt over time.
- Compliance step: Staying current on your plan helps keep the IRS off your back.
The Cons:
- Interest and penalties continue to accrue—and right now, interest is compounding daily at 8%.
- Payments apply to interest and penalties first, not the actual tax debt.
- A notice of federal tax lien may still be filed, even with a payment plan in place.
- It’s not guaranteed: You must qualify, prove affordability, and maintain compliance going forward.
Not All Payment Plans Are Created Equal
The IRS has multiple types of installment agreements:
- Streamlined agreementsfor debts under a certain threshold
- Partial Pay installment agreementsif you can’t afford the full balance
- Non-streamlined agreementsthat require full financial disclosures and negotiation
The problem? Most people don’t know which kind they’re in—or if it’s the best option. There May Be Better Options
Installment agreements are just one type of collection alternative. Depending on your situation, you may qualify for:
- Offer in Compromise (OIC)– Settle for less than you owe if you qualify
- Currently Not Collectible (CNC)– Pause collection if you can’t pay anything right now
- Penalty abatements– Reduce your balance by challenging certain penalties
- Bankruptcy(in rare, qualified cases)
The Bottom Line
The IRS’s default is rarely in your best interest.
If you’re one of the millions facing tax debt—or already in an installment agreement—it’s smart to have a tax attorney review your case. A well-structured agreement can protect you, but the wrong one can cost you thousands in interest, time, and stress.
At Orlando Tax Law, we help clients:
- Understand their IRS situation
- Evaluate all resolution options
- Negotiate directly with the IRS on their behalf
Contact us today for a consultation and find out what options you really have.
The IRS may have a default solution—but your situation deserves a tailored one.
