installment agreement
Installment agreement is a payment arrangement that allows a taxpayer to satisfy an outstanding federal tax liability through monthly payments to the Internal Revenue Service (IRS). The authority for such agreements is established under Internal Revenue Code § 6159.
The IRS may, at its discretion, enter into a written installment agreement when a taxpayer is unable to pay the full amount due. In certain cases, the IRS is required to approve an agreement, specifically when the taxpayer owes $10,000 or less and meets the statutory conditions for a guaranteed installment agreement. These conditions include timely filing and payment history, an inability to pay the balance in full, and agreement to full payment within three years. A streamlined installment agreement applies to individual taxpayers with a liability of $50,000 or less who can pay within six years (72 months). Taxpayers exceeding these thresholds may still qualify for other installment plans upon submission of detailed financial information.
The American Jobs Creation Act of 2004 expanded § 6159 to authorize partial payment installment agreements, allowing the IRS to accept reduced payments if such an arrangement promotes full or partial collection of the debt. These agreements are subject to biennial review to assess continued eligibility. Installment agreements must be requested and maintained in accordance with IRS procedures. The IRS may terminate an agreement for default, submission of inaccurate information, or significant change in financial conditions.
[Last reviewed in October of 2025 by the Wex Definitions Team]
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