How it works
An installment agreement is a monthly payment plan for an assessed balance. Individuals owing 50,000 dollars or less can usually set one up online or with Form 9465 for up to 72 months without a financial statement. Larger balances require Form 433-F or 433-A, with the payment set from IRS expense standards. While the agreement is in place, levies stop and the failure-to-pay penalty drops to 0.25 percent per month, though interest continues.
Why it matters
An agreement you cannot sustain defaults, usually because of a new year’s balance, and starts the process over with a CP523. Penalty abatement first lowers the amount the plan has to cover.
Example
A contractor owes 36,000 dollars. He sets up a 72-month streamlined agreement at 500 dollars a month, then requests First Time Abate on the failure-to-file penalty, reducing the balance by 4,000 dollars and shortening the plan.
Related: Form 9465, Notice CP523, allowable living expenses. Read more: IRS installment agreements.
