What Is IRS Wage Garnishment?

The IRS has many ways to collect money if a taxpayer does not pay their taxes. At first, the agency will send you notices and try to work with you. But if you ignore the notices and don't make arrangements for your tax debt with the IRS, the agency can come after you and involuntarily take the money you owe. One method of forcibly taking money for unpaid taxes is called an IRS wage garnishment. Here is an overview of the IRS wage garnishment process.

What Is IRS Wage Garnishment?

IRS Wage garnishment is when the IRS collects unpaid taxes directly from an employee's earnings. A wage garnishment allows the IRS to collect money when you have not been paying your tax liability. With the typical wage garnishment process, the IRS contacts your employer and instructs them to take funds out of your paycheck using IRS Form 668-W. Next, your employer must send the money to the IRS. If your employer fails to send payment to the IRS, liabilities may pass to your employer. As a result, once your employer receives this notice, you can rest assured that they will do as requested.

How Much of Your Wages Can the IRS Garnish?

If you have ever had your wages garnished before, it’s likely been limited to a set percentage of your disposable income. That's how it works with most creditors, but the IRS handles wage garnishment in a completely different way. They decide how much money you can keep, based on how many dependents you have and your filing status. Then, they can then garnish anything above that amount. As a result, they can garnish a significant amount of what you earn. 

The amount the IRS allows you to exempt from garnishment changes slightly each year, so it’s important to look at the most recent version of Publication 1494. For example, as of 2024, a single taxpayer with no dependents would be allowed to keep $561.54 every two weeks. The more dependents you have, the more you are permitted to have exempt from garnishment. Those who file head of household or married filing jointly also have higher exemptions than single or married filing separately taxpayers.

In most cases, this amount is probably less than you spend on a regular basis.  In 2024, if you get paid weekly and you file single with three dependents, the IRS leaves you only $569.22 a week. If you get paid weekly and file as married filing jointly with three dependents, you get to keep $849.99 per week or if paid monthly, $3,683.34 per month. The federal law allows the IRS to take any money you earn over these thresholds. Moreover, these amounts go higher if the taxpayer takes an additional standard deduction for their age and/or blindness.

How Do You Know the IRS Is Going to Garnish Your Wages?

The IRS will send you a notice that they are going to garnish your wages. The notice will include the amount of money that they plan to take from your paycheck and where the money will be sent. If you do not agree with the IRS's decision to garnish your wages, you can appeal the decision or try to negotiate a payment plan. You must respond by the deadline noted on the letter or the IRS will move forward with the wage garnishment. Note this is never the first notice that you receive from the IRS. Usually, by the time the IRS garnishes your wages, the agency has sent you several notices.

If the IRS does garnish your wages, they will send a notice to your employer with instructions on how much money to withhold from your paycheck. Your employer will give you a form to fill out so that they can figure out exactly how much to withhold. If you don't return the form on time, your employer will withhold the maximum amount from your check. Usually, you have three working days to return the form. At this point, whether you returned the form or not, your employer is required to withhold the money and send it to the IRS.

When Will the IRS Impose a Wage Levy and Garnish Wages?

A tax levy is typically the next collection step following a tax lien. However, sometimes the IRS skips the tax lien and begins to levy right away instead. A levy is when the IRS takes your assets to satisfy your taxes owed. Most private creditors have to go through a legal process to become a judgment creditor. The IRS doesn't go through this same process. As long as the IRS sends you the correct notices, the agency can start to garnish your wages.

The IRS can legally seize an employee's wages, bank accounts, Social Security benefits, retirement accounts (rare), commissions, property, rights to property, and more. For the IRS to levy an employee's wages or other assets, however, the IRS must meet the following three requirements:

• The IRS assessed a tax liability and sent you a notice demanding payment
• You neglected or refused to pay the tax amount due.
• The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (must be sent to you 30 days before they a levy ensues)

The IRS must deliver these notices by hand or send them via registered mail to your last known address or place of employment. Once you receive the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, the IRS can begin to levy after 30 days.

Exceptions to the IRS Levying Without Providing 30 Days Notice in Advance

The IRS doesn’t always have to provide you with a 30-day notice of your right to a hearing before levying your property. Furthermore, here are some situations where they do not have to notify you in advance:

• Jeopardy Levy  – If the IRS feels that they are in jeopardy of collecting the tax, they can levy your property without providing notice in advance.
• A Disqualified Employment Tax Levy – If you have previously requested a collection due process hearing for payroll or employment taxes for a specific tax period within the last two years, the IRS can levy for other tax periods without providing you notice in advance.
• Federal Contractor – If you are a federal contractor, then the IRS can seize property and provide you notice afterward.
• State Tax Refund Levy – The IRS can seize a state tax refund without offering you 30 days' advance notice

The IRS does not like to impose wage levies. They are costly, and the IRS prefers to use them as a threat. However, if you don’t respond, the IRS will carry through on that threat. If you receive a final notice, request a free consultation to get help from a tax professional to understand all your options. A licensed professional can contact the IRS and apply for a payment plan, settlement, or hardship status, just to name a few tax relief options.

IRS Wage Garnishments and Child Support

Many people have their wages garnished for child support. Child support wage garnishments take precedence over most over garnishments. This means that your employer will withhold amounts for a child support garnishment before most other garnishments. However, there is an exception for IRS garnishments. If the IRS wage garnishment was entered before the child support wage garnishment, the IRS wage garnishment will take precedence. In other words, your employer will take out the garnishment for the IRS garnishment first, and then, they will take out the child support garnishment. If the child support garnishment was received first, it will typically take precedence over the IRS wage garnishment.  

IRS Wage Garnishments and Garnishments for Federal Student Loans

Another common wage garnishment is for student loans. Typically, IRS tax garnishments take precedence over garnishments for federal student loans. If your employer receives a request to garnish your paycheck for both IRS taxes and student loans, they will typically follow through with the IRS tax garnishment first. Note that under federal law, your employer cannot terminate your employment for a single garnishment, but there is no federal law that prohibits them from firing you if you have multiple garnishments. 

How to Stop an IRS Wage Garnishment

A wage garnishment can be a major financial burden. It can leave you with less money than you need to cover your basic living expenses. If you are facing an IRS wage garnishment, there are a few things that you can do to stop it. You can stop a wage garnishment by paying your taxes in full. If that's not possible, you can contact the IRS and try to negotiate a payment plan. If you arrange to pay back your taxes over time, the IRS may stop the garnishment. You can also request an offer in compromise, which is when the IRS lets you pay back your taxes for less than you owe. If you cannot afford to pay anything, you can request to have your account labeled as currently not collectible. When you have that status on your account, the IRS pauses all collection actions. 

The IRS may also stop the wage garnishment if you can prove that it's causing financial hardship. In some cases, you may also want to prove that stopping the garnishment will allow you to pay off the tax liability faster. If you can prove that fact, the IRS will also stop the garnishment. You can even stop a wage garnishment by quitting your job. But this is not ideal because the IRS will find you at your next job.

Get Help Stopping an IRS Wage Garnishment

There are several ways to stop wage garnishments with the IRS. The method you choose to use depends upon your financial and tax situation. It is a good idea to understand the various options so you can ensure the best financial outcome for your situation. It is generally a good idea to talk with a tax professional about your wage garnishment to get the best outcome. You can start your search below using the form to find the highest-rated local tax professionals from our large network of tax problem experts around the country.

IRS Wage Garnishment Frequently Asked Questions (FAQs)

Below you fill frequently asked questions (FAQs) regarding IRS wage garnishments or wage levies. We have also included some information on state wage garnishment as well. Please contact us if you would like us to answer additional questions.

What Is a Wage Levy In Regards to Taxes?

The Department of Revenue also has a list of specialized tax classifications with their tax rates as of 2025. Click the arrow below to view the full list.

Also called wage garnishment, an IRS wage levy is when the Internal Revenue Service legally takes money directly from your paycheck to satisfy taxes owed. The IRS contacts your employer, tells them how much to pay you, and instructs them to send the rest of the money to the agency.  The states have the same enforced collection action with the ability to levy wages just like the IRS.

What if My Employer Received IRS Form 668-W?

If your employer receives IRS form 668-W, this notice is notifying them that you owe taxes and instructs them to withhold some wages to send to the IRS to make payments towards the taxes owed. Your employer must comply with this notice or they can face serious penalties if they don't comply.

How Much of My Wages Can the IRS Take?

When the IRS tells your employer to garnish your wages, the agency sends publication 1494 to your employer. The table dictates how much you get paid, and the IRS takes everything over that amount. Your filing status, pay frequency, and the number of dependents you claim determine the amount per paycheck you get to keep. Furthermore, whether the taxpayer reached the age of 65 and/or is blind also affects the amount a taxpayer can exempt from levy.

For example, as of 2022, if you are a single person claiming two dependents and your employer pays you weekly, the IRS allows you to keep $418.28 per week, and the agency garnishes the rest. If you are married filing jointly with three dependents and you get paid weekly, you keep $751.94 per week. All wages and bonuses over that amount go to the IRS. See the table link above to determine what the IRS will leave you with based on your filing status, dependents, and frequency of pay.

Can the IRS Levy Bonus Payments?

Yes, the IRS can levy a bonus check that your employer pays separately from your regular paycheck. In this case, if you still owe taxes, your employer will send your whole paycheck to the IRS since the amount exempt from the levy was paid to you already for the particular pay period in question.

Can You Stop IRS Wage Garnishment?

Yes, once the IRS has started to garnish your wages, you can stop the process. You need to contact the IRS to set up some agreement or resolution. Alternatively, you can apply for an offer in compromise or try to get declared as uncollectible. See this page for more information on stopping and releasing IRS wage garnishment.

Can You Stop State Wage Garnishment?

Every state, for the most part, works differently. Some states will lower the wage levy but not completely remove it until you pay off your tax balance or show hardship. For example, CA’s Franchise Tax Board and North Carolina’s Department of Revenue will usually not release a wage garnishment (only reduce it) unless you can prove severe financial hardship.

How Long Does an IRS Wage Garnishment Last?

The garnishment on your wages will last until all the taxes owed are paid back in full. This includes penalties and interest as well. They will take the maximum amount that they are allowed to take by law if you do not make some other type of arrangement to pay back the taxes owed.

How Can I Contact the IRS About My Garnishment?

You can call the IRS at 800-829-7650 or 800-829-3903. These are the phone numbers to resolve an issue paying an IRS tax bill. 

What Are the Laws on IRS Wage Garnishments? What Are My Rights?

Legally, for the IRS to garnish your wages or levy any of your assets, the following three things must happen (with exceptions in some cases):

• The IRS must assess a tax liability and send you a notice to demand payment.
• You must ignore the notices or refuse to pay the amount due.
• The IRS sends a “Final Notice of Intent To Levy and Notice of Your Right To a Hearing,” at least 30 days before the levy starts.

If you ignore that final notice, the IRS can start to garnish your wages once the 30 day period has elapsed. There are exceptions whereby the IRS does not need to give you 30 days from a Final Notice of Intent to Levy.

If the IRS feels the collection of tax is in jeopardy, they don’t have to follow the rules above. If you are a federal contractor with taxes owed, or the IRS issued a Disqualified Employment Tax Levy, they do not have to offer you a hearing 30 days in advance of the levy taking place.

What Section of the Internal Revenue Code Gives the IRS Authorization to Levy?

Section 6331 of the Internal Revenue Code authorizes the IRS to levy taxpayers to collect back taxes.

What Kind of Wages Can the IRS Take or Levy?

The IRS can seize wages, salaries, commissions, dividends, and payments on promissory notes held by someone else. The IRS can also levy your bank account, someone else’s bank account (if you are a joint account holder), federal retirement annuity income from the Office of Personnel Management, federal contractor payments, retirement accounts, your house, car, and other property.

What Types of Property Are Exempt from an IRS Levy?

The IRS cannot levy unemployment benefits, Social Security Disability Insurance, specific annuity and pension payments, workers compensation, certain public assistance payments, assistance under the Job Training Partnership act, and court-ordered child support payments. Furthermore, the IRS cannot levy necessary schoolbooks and clothing, as well as precise amounts of fuel, furniture, books, and tools for business, professions, and trades.

How Can I Avoid a Tax-Related Wage Garnishment?

The best way to avoid tax-related wage garnishment is to stay on top of all required tax filings. Pay all amounts owed to the IRS and State (if applicable). If you cannot afford to pay the IRS or State, contact a licensed tax professional for help. You can request one by calling our free tax consultation number above.  Realize that the IRS and many states have tax options depending on your financial and tax situation. For example, payment plans, settlements, penalty reduction, and so forth.

How Can a Tax Professional Help With IRS or State Wage Garnishment?

Tax professionals analyze the situation and help you come up with the best resolution for your needs. In particular, a tax professional can put a hold status on a levy and negotiate an agreement on your behalf. The hold stays in place during the entire negotiation. Therefore, you don’t have to worry about the IRS garnishing wages during this timeframe. If you don’t agree with the amount due, a tax professional can submit an appeal for you. Furthermore, they can analyze your financial situation to get you the best resolution with the IRS or state. Reach out to a licensed tax professional by clicking here that has experience resolving garnishment cases with the IRS. Or start your search below by selecting the appropriate agency and filtering for your unique tax problem.

Tax Wage Garnishment Help: Resolve an IRS or State Levy on Wages

Are your wages being garnished? Wondering what a wage garnishment is? Has the IRS or a state threatened to garnish your wages? If so, get professional wage garnishment help if the garnishment is tax-related.  A tax professional can help you avoid garnishment by negotiating an arrangement with the IRS or state. If the IRS is already garnishing your wages, they can in some cases lift the levy quickly while they work out an arrangement for you.

If you don’t do something, the IRS or State will continue to garnish your wages until:

• You pay off the entire taxes owed, including penalties and interest
• You negotiate an agreement with the IRS or state
• The statute of limitation on collection or the timeframe to collect on the taxes owed has expired

How Can a Tax Professional Help with Wage Garnishment?

Working with a licensed tax professional increases your chances of getting a favorable resolution or settlement. Consequently, there are many benefits to using a tax professional. Here are a few of them:

They Call the State or IRS for You

A licensed professional will call the IRS or state on your behalf.  Hold times with the IRS and many U.S. states are very long.  However,  a tax professional has a dedicated practitioner line to call with the IRS and most states.

They Know Your Tax Rights

He or she won’t unnecessarily disclose your financial details to the IRS or State. Unfortunately, many taxpayers over-disclose information to the IRS and state taxation authorities, which can complicate cases. When negotiating with the IRS or State, a tax professional has your best interests at heart. Remember, the IRS intends to collect what is due as quickly as possible. The latest tax gap report from the IRS attributed $32 billion to non-filing and $39 billion to non-payment for the 2008-2010 tax years.

They Can Remove IRS and State Wage Garnishment Quickly

If your goal is to remove or prevent a state or IRS wage garnishment quickly, then work with a tax professional. In many cases, an experienced and licensed tax professional can resolve a wage levy quickly, depending on your taxes owed and financial situation. In some states, the result may only be a reduction in your state tax wage garnishment.

Illustrates Your Eagerness to Resolve Your Tax Problems

The IRS and various states usually enforce wage levies because you have not responded to numerous letter and notices regarding your taxes. When you hire a tax professional, that gives the IRS and many state tax departments a signal that you are eager to resolve the situation. Consequently, many IRS revenue officers and representatives prefer to work with a tax professional because it means a case may come to a resolution.

Ensure You Get the Best Tax Resolution or Agreement

You may not know all your tax options. At the same time, the IRS and most state tax representatives will not give advice. Therefore, a tax professional should analyze your financial situation and determine if you meet the qualifications for various IRS and state tax programs. As a result, the tax analysis can be invaluable. If you can qualify to settle your taxes for less, why push for a payment plan you can’t afford?

They Understand Deadlines, Forms, and Documents Needed for a Specific Tax Resolution

Tax professionals and tax resolution firms have a lot of experience negotiating with the IRS and states. They know what and when to file it.  They understand time frames and deadlines. Their expertise improves your chances of an optimal resolution.

They Prepare Tax Returns

Most licensed tax professionals (EAs, CPAs, and Tax Attorneys) are capable of filing tax returns. Our diverse partner has licensed tax professionals specifically for filing individual and business tax returns. Moreover, they will ensure you only file a tax return if it is required or if it benefits you over any tax preparation fees.

How Does the Tax Wage Garnishment / Tax Relief Process Work?

Here’s what happens with many tax professionals (not all) when you request a free consultation for help with state or IRS wage garnishment.

Free Tax Consultation

First, you should connect with a licensed tax professional who will review your tax and financial situation. The tax pro or their assistant will ask you specific questions as to when the wage garnishment began, for how much, and the start date of the wage garnishment. If you are calling because you received a letter, when did you receive it? Was it certified?

The tax pro or their assistant will also ask you if you filed all tax returns, what letters the IRS or State sent you, and the details about your financial situation. To prepare, try to obtain specific numbers regarding your monthly income, expenses, assets, and liabilities. Assets include your house, cars, bank accounts, retirement accounts, brokerage accounts, and so forth. Liability comprises your mortgage loan (if any), car loan (if applicable), student loans, and so forth.

Investigation (If necessary)

If you are unsure about some of your tax details, the tax professional or firm will do an investigation generally. Specifically, an investigation entails requesting account transcripts from the IRS or State to check your filing and payment compliance records. As a result, you will know what years you have to file (if any), how much you owe for each tax year, and the penalties and interest that have accrued.

Tax Options Provided 

After a licensed tax professional reviews your case details, the firm will provide you with tax options you can pursue. If you qualify for different tax resolution programs, the tax pro assigned to your case or a representative of the firm will review the benefits and drawbacks of each option with you. Moreover, they will explain the flat service fees involved to get you into good standing with the IRS or state.

If You Decide to Hire

If you decide to move forward with a tax pro's help to stop or prevent an IRS garnishment or state tax wage garnishment, the licensed tax professional will send you a limited power of attorney (POA) to communicate with the IRS or state on your behalf. Consequently, the POA instructs the IRS and state to talk directly with your assigned tax professional. Furthermore, any mail or letters will be sent to the tax professional as well.  If there are tax filings involved, you will need specific information to complete the filing. If you cannot find old w2s or 1099s, the tax professional can request a wage and income transcript.

Finally, once the resolution is complete, the licensed professional will provide future guidance to prevent tax problems from arising again.

If you are looking for tax professionals that have experience resolving tax-related wage garnishment, visit this link or start as search below. 

Appeal an IRS Installment Agreement

Taxpayer Rights To Appeal An IRS Installment Agreement

If you request an Installment Agreement and the IRS rejects it, you have the right to appeal. Furthermore, as long as you appeal within 30 days, the IRS cannot levy your property or garnish your wages. The IRS cannot take any serious action until the appeal is complete.

If you are paying an Installment Agreement and the IRS terminates the agreement, you can also appeal. Fortunately, you have 76 days to appeal, but you should try to appeal within 30 days.

Key takeaways

• Appeal rights – You can appeal if the IRS rejects or terminates your installment agreement.
• Deadline – 30 days from the application rejection letter, or 76 days from the date the IRS terminates an existing payment plan.
• Process – Ask to speak to a manager. If they don't resolve the issue, file Form 9423 to request a hearing.

How to Appeal a Rejected IRS Installment Agreement

If the IRS rejects your Installment Agreement, a Revenue Officer may contact you directly. In other cases, you may receive a letter or phone call that is not from a Revenue Officer. Here’s how to appeal in both situations.

If the IRS notified you but a Revenue Officer is not involved, here’s what to do:

1. Call the IRS using the phone number in your letter.
2. Tell the IRS why your Installment Agreement should be accepted.
3. If the agent refuses your request, ask to speak with a Revenue Officer or a manager.
4. If they are not willing to work with you, say you would like to appeal.
5. Move to step 3 below.

If an IRS Revenue Officer notified you of your rejection, here’s how to appeal:

1. Call the phone number on your notice and explain why you want to appeal the decision.
2. If the Revenue Officer still refuses to accept your Installment Agreement, ask to speak to their manager.
3. If you have no success with the Revenue Officer’s manager, ask to speak to a Collections Manager.
4. Explain your case to the Collections Manager.
5. Fill out Form Form 9423 (Collection Appeal Request).
6. Attach a written explanation of your appeal with Form 9423.
7. Send in Form 9423, postmarked at least 30 days after the date on the rejection letter.
8. Wait for the decision.

The decision on your appeal is binding. If the Office of Appeals rejects your appeal, you cannot appeal again. It is always a good idea to work with a licensed tax professional who has experience appealing installment agreements.

Common Reasons for the Rejection of an IRS Installment Agreement

The most common reasons for Installment Agreement rejections:

1. 1. You defaulted on installment agreements in the past.
   2. You have outstanding past tax returns.
   3. You don't qualify for the type of installment agreement you're applying for. For example, you owe over $50,000 and are applying for a Simple Payment Plan.
   4. You didn’t complete Form 433 (Collection Information Statement) when it was required. Or, Form 433 was inaccurate or incomplete.
   5. The IRS believes your living expenses are too high—for example, the IRS may reject a plan if you have kids in private school, really high car payments, or other “unnecessary” expenses

How to Appeal the Termination of an Installment Agreement or Reinstate It

If the IRS plans to cancel your Installment Agreement, or your payment arrangement is in default, you will receive a termination warning notice in the mail. Usually, this is a CP 523 notice. The IRS notice notes that your agreement is in default, and it tells you the IRS can levy assets or file a tax lien.

You have 76 days to request an appeal. However, if you don’t appeal by the 30th day (after the notice was issued), the agreement will be terminated on the 46th day. Moreover, if you appeal after that point, the plan will be reinstated if your appeal is accepted.

Generally, you can only appeal a termination notice once in a 76-day period. It’s important not to let your agreement lapse twice in that short of a time period.

If an IRS Revenue Officer notified you of the termination, here’s how to appeal:

1. Call the IRS number on your notice and tell them why you want to appeal the termination. Make sure to call within 30 days at best or 76 days at worst.
2. If the IRS Revenue Officer refuses to reinstate your Installment Agreement, speak to their manager.
3. If you have no success with the Revenue Officer’s manager, ask to speak to a Collections Manager.
4. Talk to your Collections Manager and explain your case.

If your rejection letter came in writing, here’s how to appeal:

1. Complete Form 9423 (Collection Appeal Request).
2. Preferably attach a written letter of your request for appeal with Form 9423
3. Send in Form 9423, postmarked at least 30 days within the date on your CP 523 notice.
4. Do not send this form to the Independent Office of Appeals. Rather, send it to the address on the letter explaining your appeal rights.

Common Reasons for the Termination of an IRS Installment Agreement

An IRS Installment Agreement termination happens for a few reasons:

1. You missed a payment. The IRS waits 30 days before terminating your agreement if it is only your first or second missed tax payment
2. The IRS realized information on your Form 433 was incorrect or untruthful
3. You failed to file a current return.
4. You didn’t pay a current tax bill.

The process of appealing a denial or termination of an IRS Installment Agreement is not straightforward. As a result, many taxpayers choose to work with a licensed tax professional. Form 433 (Collection Information Statement) and Form 9423 (Collection Appeal Request) can be confusing.

What to Expect During the Appeals Process

The appeals hearing will likely take place over the phone. You do not have to go to a courtroom. Most appeals officers are experienced IRS pros who were formerly collection agents or auditors, so they have a deep understanding of the tax law and IRS processes, but more importantly, they're often flexible in an attempt to avoid litigation. 

During the hearing, you will get to explain your situation to the appeals officer. The revenue officer or collections agent will not be present. Instead, the appeals officer will get their side of the story through the collections report. If the appeals officer agrees with you, you will be able to keep your payment plan or set up an installment agreement. If they don't, you generally do not have any additional appeal rights, and you must look into alternatives.

Alternatives to Installment Agreements – What to Do If the IRS Rejects Your Appeal

If the IRS rejects your appeal, you will not be able to set up an installment agreement. The balance will be due in full, and if you don't pay, the IRS may initiate involuntary collection actions such as garnishing your wages, seizing your bank account, and taking your assets. However, you typically have 30 days after the appeals decision before the IRS can take any action. 

Talk with a tax professional about your options if you cannot pay in full. If you have limited income and assets, you may want to look into an offer in compromise or currently not collectible status.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.

How to Release a Federal Tax Lien: Get Free from IRS Tax Liens

A release is when the IRS removes its legal claim to your assets  — in other words, the tax lien stops existing. To get an IRS tax lien released, you generally must pay off the tax liability in full, the collection period for the tax must expire, or you must prove that you don't really owe the tax. Keep reading for more details and a look at your options if you don't qualify for a lien release. Or use TaxCure to find a tax pro today. Start your search in the box, and then filter your results to find a pro who has experience with tax liens. 

Key takeaways

• Lien release — When the IRS lifts your obligation to pay the taxes associated with the lien.
• Public record — Even if the lien is released, a public record of the lien may continue to exist. 
• Lien withdrawal – When the IRS removes all public record of the lien. 
• Withdrawal after release – The IRS will withdraw the lien once it's released if you stay compliant with filing and payment obligations for three years and are up to date on all payments and deposits. 
• Withdrawal without release – Even if the lien still exists, the IRS may release it from the public record if you owe less than $25,000, set up direct debit payments, and make three monthly payments, or if you meet other conditions.

What Is a Tax Lien Release?

A tax lien release is when the IRS no longer holds you responsible for paying the taxes related to a tax lien. Once released, the lien is no longer attached to your assets, but a record of the lien may continue to exist until the IRS withdraws the notice of federal tax lien. 

How to Get a Tax Lien Released

Typically, whether you're dealing with individual or business tax liens, the only way to get a lien released is to pay the tax debt in full. Once that happens, the IRS will file a Certificate of Release, but if a Notice of Federal Tax Lien was filed, that public record may continue to exist unless the IRS withdraws the lien (more on that below). Additionally, the IRS will also release the lien if you:

• Settle Taxes Through an Offer in Compromise – An offer in compromise (OIC) gives you the opportunity to settle your taxes for less than you owe. You have one of two options: making a lump sum payment within five (5) months of acceptance or electing to pay off the settlement amount over two years. If you meet the payment requirements on an Offer in Compromise, the IRS will release the tax lien.
• Let the Statute of Limitations Expire – Like most liabilities, IRS taxes have a statute of limitations on collection, and if the Collection Statute Expiration Date arrives, the IRS can no longer enforce the tax lien. Typically, federal taxes expire 10 years after you file your return or after the IRS assesses the taxes owed. The IRS usually extends the statute of limitations on collection if you file bankruptcy, you file an offer in compromise, or if you sign Form 900 (Tax Collection Waiver).
• Give the IRS a Bond Guaranteeing Payment – You can also post a bond guaranteeing payment. It has the same effect in many cases as paying your taxes in full. Taxpayers rarely leverage surety bonds because it is usually challenging to qualify for one and because of the adverse effects on one’s credit. Moreover, in most cases, the cost of the bond would be the same as paying off the taxes.

Once you have met one of the above requirements, the IRS should release your tax lien within 30 days. However, in many cases, the IRS doesn’t automatically release the lien. If that happens, contact the Centralized Lien Unit at (800) 913-6050. 

Partial Release of a Tax Lien

In many cases, the IRS will file a Notice of Federal Tax Lien with more than one taxpayer’s name on it. In such situations, if one taxpayer on the NTFL satisfies part or all of their liability while the other does not, the IRS may issue a Certificate of Release with the word “partial” annotated on it. Generally, you can accomplish a partial release with many of the same reasons as above.

How to Get a Tax Lien Withdrawn After Release

As indicated above, a lien release is when the IRS releases your legal obligation to pay the tax liability, but it does not necessarily withdraw the lien from the public record. When the IRS releases a tax lien, it clears the statutory tax lien for your taxes as well as the public NTFL. The IRS does this by filing a Certificate of Release of Federal Tax Lien. However, other tools used by lenders will have references to your tax lien for up to seven years unless the IRS withdraws it. According to the IRS, after the lien is released, you can get it withdrawn by:

• Being in compliance with filing the last three years of personal and, if applicable, business tax returns.
• Being current with estimated quarterly tax payments and tax deposits, if required.

However, in some cases, you can get a lien withdrawn before it's released. If that happens, you will still owe the tax, but the IRS will remove the public record of the tax lien.

How to Get a Federal Tax Lien Withdrawn Before It's Released

To get the IRS to withdraw a tax lien that hasn't been released, you can file Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien). If the IRS approves your request, the agency will file a document called the Withdrawal of Filed Notice of Federal Tax Lien. It is also known as Form 10916(c), which the IRS utilizes to withdraw an active NTFL. 

Here are the main ways to get the IRS to withdraw a tax lien (other than paying in full and meeting the terms above):

Set Up a Direct Debit Installment Agreement (DDIA)

If you set up a DDIA, the IRS will withdraw the tax lien if you meet these conditions:

• You are an individual, a business with income tax liabilities only, or you are out of business (for which any type of tax qualifies).
• You owe less than $25,000.
• You agree to a direct debit installment agreement with a 60-month term or less. What this means is that the payment is directly taken each month from your bank account. If the IRS can only legally collect for say 30 months, then you must pay off the balance in 30 months or less.
• You have made three (3) direct electronic monthly payments.
• You are in filing and deposit compliance.

Convert a Regular Installment Agreement to a DDIA

If you have an installment agreement already with the IRS, and you are under the $25,000 threshold, you can convert it to a DDIA. You will now qualify to have the lien withdrawn as long as you make three satisfactory payments and you're current with all filing and payment requirements for yourself and/or your business if applicable.

Agustin Arbulu, a Michigan Tax Attorney, highlights a common misconception: 'Clients who have a tax lien filed believe that simply getting the assessed balance below $50,000 will suffice to secure the withdrawal of the tax lien. WRONG! It is critically important to get the balance owed to the IRS below $50,000 before a federal tax lien is filed and immediately enter into a DDIA.'"

Prove That the IRS Didn’t Follow Required Procedures

You can also request a lien withdrawal if the IRS didn’t follow required procedures or filed the tax lien prematurely. Here are some examples:

• An IRS employee knows you have a carryback, overpayment, or adjustment that will satisfy the tax lien and files the tax lien anyway.
• You filed for bankruptcy, and the IRS filed an NTFL while an automatic stay was in place.
• You were in a Combat Zone, away from active military outside the U.S. on a contingency mission, or hospitalized while serving in a Combat Zone
• The IRS filed an NTFL for an Affordable Care Act shared responsibility payment (penalty for not carrying health insurance).
• The IRS filed a duplicate NTFL

Establish That Withdrawing the Tax Lien Will Help Facilitate IRS Collection

If withdrawing the tax lien will facilitate the collection of tax, you can request a withdrawal using Form 12277. For example, say you have no assets, you don’t think you will acquire any assets in the future, and you have no other secured creditors. In this situation, you may agree to make more significant payments to the IRS through payroll deduction than they otherwise would receive through wage garnishment. Based on that, you may be able to convince the IRS that withdrawing the NTFL will facilitate IRS collection.

Prove That Withdrawing the Tax Lien Is In the Government’s Interest

If you, or the Taxpayer Advocate Service acting on your behalf, believe withdrawing the tax lien benefits the taxpayer and the U.S government, the IRS may remove it. For example, in many states, professionals can lose their license or job if they have a tax lien. In such cases, the IRS may approve a withdrawal request if it helps the taxpayer’s credit profile and improves the chance of continuation of payments to the IRS. 

Alternatives to a Lien Release or Withdrawal

If you can't pay in full and don't qualify for a withdrawal under other conditions, you may need to consider the following options:

• Appealing an IRS Tax Lien – After the IRS sends you a Notice of Federal Tax Lien with your right to a collection due process hearing, you have 30 days to request a CDP hearing. There, you can explain why the lien should not be filed against you and talk about payment options. However, this is generally only an option right after the notice of tax lien has been filed.
• Subordinating the tax lien — When the IRS allows a new creditor to move ahead of the IRS in priority. This can help get financing in certain situations and will be allowed by the IRS if it is in their best interest. For example, this can help you or your business refinance a mortgage so that you can pay off the tax debt or make larger monthly payments.
• Discharge the lien — When the IRS removes the lien from a specific piece of property. For example, so that you can sell the property to pay off your tax debt.

When In Doubt, Work with a Licensed Tax Professional

In any event, we highly recommend you work with a licensed tax professional to ensure you navigate the IRS collection process, avoid levies, and obtain the most beneficial resolution for you or your business. At TaxCure, our goal is to simplify the process for taxpayers to find tax professionals. We have a unique ranking algorithm that takes into account tax professional experience to ensure you see the pros with experience that match your unique problem.

You can view the list of top-rated professionals that help with tax liens. Note that this list is for IRS tax liens; if you have a specific state agency that has filed a tax lien against you, please be sure to select that agency in the filter to see the professionals that have experience helping taxpayers deal with that particular agency. You can also use the form below to start your search today.

Requesting & Filing for IRS Penalty Abatement

There are a few ways to request penalty abatement from the IRS. To be successful, you need to understand the requirements before submitting your request. Here are three options:

• Written Petition — A letter stating why your penalties should be erased.
• IRS Form 843 (Claim for Refund and Request for Abatement) — This is the official form for an abatement request. You can include a written petition along with this form.
• Verbally — If for some reason you cannot write, you can meet in person or talk to someone over the telephone to explain your situation. In most cases, we recommend you apply for first-time penalty abatement over the phone (unless you qualify for automatic relief).

Supporting Documents for Penalty Abatement

With all of these methods, you need to show the IRS evidence of the reason why you are requesting abatement. For instance, if you are claiming that a family member’s death prevented you from filing on time, you need a copy of the death certificate. Moreover, other examples include doctor’s notes for illnesses and proof of insurance claims related to natural disasters, theft, or fire.

Additional Tips for a Penalty Abatement Request

If you want the IRS to eliminate penalties, you should keep the following tips in mind.

• If using a written petition, write it like a formal letter.
• Make your letter short and to the point. Provide ample details without over-explaining.
• If you choose to submit IRS Form 843, it is a good idea to submit a written petition as well.
• Be sure to submit supporting documentation for the reason you are claiming.
• Don’t send the IRS original copies of your documents. Only send copies in case something gets lost.
• Send the written petition to the address listed on the assessment letter you received from the IRS.
• If you want to verbally request penalty abatement, contact your nearest IRS office and ask for a face-to-face meeting.

When you mail your documents to the correct address for your penalty abatement request, the IRS should respond within 60 days. If the IRS doesn’t respond, send another copy of your request and the supporting documents. If the IRS denies your request, you cannot use the same reason to apply again.

If you are looking for assistance with a tax professional who has penalty abatement experience, you can start here or you can begin a search below: 

Sample IRS Penalty Abatement Request Letter

You can write a letter to the IRS to request penalty abatement. To help you out, we have provided sample letters that you can use to request waivers of several different types of IRS penalties. Simply copy these letters into a word processing program. Then, customize them with your own details, print, add attachments, and send to the IRS. 

To get guidance through the process, use TaxCure to find a local tax professional today. 

Key Takeaways

• You can write a letter to the IRS to request relief from late filing, late payment, late deposit, and late information return penalties.
• Make sure you meet the payment and compliance requirements before sending your letter.
• Use a sample penalty waiver letter to ensure you include the right information.
• Copy a sample penalty waiver letter into your word processing software and then customize the letter with your details. 
• If you don't want to write a letter, call the IRS or file Form 843.

Table of Contents

• What to Do Before Requesting IRS Penalty Abatement
• Sample Letter for First-Time Penalty Abatement
• Sample Letter to Request Penalty Abatement for Reasonable Cause
• Sample Letter for Partnership Late Filing Penalty
• Frequently Asked Questions About Abatement Letters
• Other Ways the IRS May Forgive Taxes Owed
• Help With Tax Penalty Abatement

What to Do Before Requesting Penalty Abatement

The IRS will only give you penalty abatement if you are currently compliant with your tax requirements, and often, you may receive first-time abatement automatically. Before writing a letter to request a penalty waiver, make sure you didn't get automatic abatement, and if not, do the following:

• File unfiled returns – Generally, the IRS will not approve your request for penalty abatement if you have outstanding tax returns. Make sure to file your old returns. If you are several years behind, you usually only have to file the last six years but talk with a tax professional to learn about the best option in your situation. 
• Make a plan to avoid penalties in the future – Typically, you incur penalties when you're unable to pay your taxes in full or you file late. To avoid a tax bill at filing time, increase how much your employer withholds from your check by filing a new W4. If you're self-employed, make larger quarterly payments and talk with a tax pro to make sure you're optimizing your tax situation. If you filed late, pay closer attention to the deadlines next year and find strategies to help you avoid procrastination. 
• Set up a payment plan – You don't necessarily need to set up a payment plan to get penalty relief. As of 2025, the IRS ended this requirement. However, if you don't set up payments or pay off the balance in full, penalties will continue to accrue on your account, and you won't get the full effect of the waiver. Setting up a payment plan will reduce the failure to pay penalty to just 0.25% per month. 

Joshua A. Webskowski, EA, USTCP shares why many IRS abatement letters get denied and how to do it right:

“The most common mistake taxpayers make when writing a penalty abatement request letter is treating it like they're submitting a complaint to a suggestion box, instead of addressing the accepted reasonable cause explanations published by the IRS.

Many will write things like ‘this penalty is not fair’ or ‘I can’t afford to pay,’ but that doesn’t meet IRS standards. A strong abatement request should be precise and concise—usually no more than one or two pages—and directly reference the reasonable cause criteria, such as serious illness, natural disasters, or reliance on a tax professional.

Always include documentation that supports your claims, such as hospital records or communication from a CPA. Most requests are denied because they miss one or more of these key elements.”

Luca Pizzale, EA outlines the two biggest mistakes taxpayers make in abatement letters and how to avoid them:

“People often make one of two errors.

On one end, taxpayers often don't provide enough information or documentation. The best letters tell a strong story of what happened. The IRS is specific when it comes to what meets reasonable cause, and the story has to align with their criteria. Likewise, the documentation needs to align with your story, both in the facts and the timeline. If you are vague, it is hard for the IRS agent to know whether you meet the guidelines for penalty abatement. Be specific and provide a detailed timeline with documentation.

On the other end, people sometimes give too much information. IRS agents are human, and they can get lost if you give them your whole life story. As with most things in life, focus on quality over quantity. If you demonstrate in your letter that you meet the guidelines for reasonable cause and you provide strong supporting documentation to back up your claims, you are in a good place. The best letters strike a balance between detail and conciseness.”

A well-structured letter that presents clear, factual reasons and includes supporting documentation will have a much better chance of success.

In almost all cases, you should make payment arrangements on the tax debt before you request penalty waivers, even if you're not required to. To give you an example, imagine that you incurred failure-to-pay penalties for $1,000 on your account. You requested first-time penalty abatement, and the IRS waived the penalties. However, you didn't make payment arrangements on your tax debt, and thus, the IRS continued to assess the failure-to-pay penalty at a rate of 1% per month. On a $10,000 tax bill, that's $100 per month, and it will continue to get added to your account until you make payment arrangements. 

Sample Letter for Requesting First-Time Penalty Abatement (FTA)

You can request first-time penalty abatement on the following penalties:

• Failure to file penalties (aka late filing penalties)
• Failure to pay penalties (aka late payment penalties)
• Failure to deposit penalties (penalties applied to employers who deposit payroll taxes late)

But again, as of 2026, this relief should come automatically, and you typically don't need to apply. However, if you're seeking penalty abatement for a previous tax year or if you didn't get automatic relief for some reason, here is a sample letter that you can use. Replace the notes in brackets with your info. Note that when you say you have not incurred any penalties for the last three years, that does not include penalties for underpaying estimated tax payments. 

Additionally, in cases where you were not required to file for all of the last three years, you just need to be compliant during the period when you were required to file. For example, if you are a business owner who's only been required to deal with payroll taxes for the last two years, you can just note two years instead of three. 

[Date]

Internal Revenue Service

[Address 1]

[Address 2]

[City, State ZIP]

Re:

[Taxpayer name] 

Taxpayer identification number]

[Tax form and tax period]

To Whom It May Concern,

[I/We] [am/are] writing to request the [failure to file, failure to pay, or failure to deposit] penalty be abated based on IRM 20.1.1.3.6.1. This is in reference to the [type of penalty] in the amount of [amount] related to Form [tax form number] for the [year or quarter] tax period.

[I/We] believe [I/we] meet the criteria for requesting FTA in regards to the [failure to file, failure to pay, or failure to deposit] because of the following reasons: 

1) Compliant with Filings – [I/We] have filed all required returns or extensions and do not have any outstanding tax returns.
2) Three-Year Clean Penalty History – [I/We] have not incurred tax penalties for the three prior years.
3) Compliant With Payments: [I/We] have paid all my taxes due, or set up an installment agreement.

Thank you for your consideration. If you have any questions or need any additional information, you can reach me at [phone number].

Best, 

[Your Name]

Sample Letter to Request Penalty Waiver for Reasonable Cause

You can apply for penalty waivers based on reasonable cause for failure-to-file penalties, failure-to-pay penalties, penalties related to informational returns, and accuracy-related penalties. The IRS is willing to entertain different "excuses" for each of these penalties. 

For failure to file or pay (aka late filing and late payment penalties), the IRS considers events like fires, natural disasters, deaths, serious illnesses, unavoidable absences, inability to get records, and system issues that prevented e-filing as reasonable cause. 

If you're dealing with an accuracy-related penalty which occurs when you significantly understate your income on your tax return, the IRS will consider the complexity of the tax issue, your knowledge/experience about tax law, steps you took to understand your obligations, and what you did to correct the issue. 

For information return penalties, you may be able to get a reasonable cause waiver if you acted in a responsible manner by requesting extensions, correcting the issue as quickly as possible, and making efforts to avoid this issue in the future. You must also prove that mitigating circumstances such as lack of access to records, actions from the IRS, or economic hardship caused you to file late.

Here is a sample letter that you can use to request penalty relief for reasonable cause. 

[Date]

Internal Revenue Service

[Address 1]

[Address 2]

[City, State ZIP]

Re:

[Taxpayer name] 

Taxpayer identification number]

[Tax form and tax period]

To Whom It May Concern:

I am writing to request an abatement of [type of penalty] in the amount of [amount] as assessed in the attached notice that is dated [month/day/year]

The reason why I _________(pick one)

• paid late
• filed late
• failed to deposit
• received an accuracy-related penalty

was because ____________ (pick one)

• I had a serious medical condition
• my house burned down
• my documents were stolen
• a close family member died
• Any other reason that prevented you from complying with the IRS requirements. If dealing with an accuracy-related penalty, consider having a tax pro help you write the reasons.

Please find the enclosed______ (describe your supporting documents)

• death notice of a family member
• letter from a doctor stating the conditions of your illness that prevented you from filing or paying
• picture of the house burned down in the fire
• insurance notice of theft of private property and documents
• Any other proof or supporting documents

Please accept my petition for abatement of penalties owed for reasonable cause based on IRM 20.1.1.3.2. If you have any questions or need any additional information, you can reach me at [phone number].

Sincerely,

Your signature

Note: You do not need to include a tax payment with your letter. However, if you have the money, it is a good idea. It may even help your case. When you send your supporting documents, make sure to only send copies. The IRS is known for “losing” documents.

Joshua A. Webskowski, EA, USTCP shares the types of documentation that are most effective when requesting abatement:

“The most persuasive supporting documents are those that directly support the taxpayer’s position and tie into the IRS’s ‘reasonable cause’ criteria.

For example, if someone was hospitalized on April 15, include the paid hospital bill and doctor’s notes. If a penalty resulted from reliance on a professional, submit emails showing the taxpayer followed their advice. For natural disasters, use FEMA notices or insurance claims.

The key to credibility is submitting third-party documentation that matches your story and timeline. Vague claims like ‘I didn’t have the money’ never work. But if everything lines up with IRS standards, your chances of success increase dramatically.”

Luca Pizzale, EA adds, “The IRS prefers recent, relevant documentation from neutral third parties. If your reason is illness, send medical records. If a fire caused delays, insurance paperwork helps. The most persuasive documents directly confirm your explanation.”

Partnership Late Filing Penalty Abatement Letter Sample

If you file your Form 1065 partnership return late, you will incur a penalty for late filing of an information return. Most IRS penalties for filing late are based on the amount of tax due on the return. However, partnership tax returns don't have a balance due (they just show income that ultimately gets reported on each partner's individual tax return), and thus, rather than charging a percentage of the tax, the IRS assesses a flat penalty on these late returns. 

The IRS may grant you automatic first-time relief on these penalties, but if not, you may qualify for relief based on the small partnership exception if you have 10 or fewer partners. You can also request abatement for reasonable cause. Use the reasonable cause sample penalty abatement letter above if you need a sample letter for a partnership late filing penalty. 

When modifying the sample letter, be sure to note that the IRS considers different factors when it comes to partnership late penalties. If you filed late due to a natural disaster, death, or illness, please note that, but then, also explain other factors such as what you did to avoid being late and how you're going to ensure that you file on time next year. 

Penalty Relief Request Letter for RMDs

If you don't take the required minimum distributions from your retirement account, the IRS will assess a penalty of 25% of the amount that you were supposed to take out — for example, if you miss a RMD of $10,000, the penalty is $2500. That drops to 10% if you correct the issue within the correction window. However, you can request relief from either of these penalties by filing Form 5329 and writing a relief request letter – check out this sample to get an idea of what to say.

FAQs About IRS Sample Letters to Waive Penalties

How do you write a letter to the IRS so they waive penalties?

Explain which penalties you want removed. Outline why you qualify for reasonable cause or any other type of penalty relief. Attach documents that support your statements, if relevant. To make the process easier, start with a sample letter to the IRS to waive penalties and then customize it with your own details.

What is an example of a penalty abatement request letter?

The two letters above show you a sample of what you should write if you want the IRS to remove penalties for your account. To get help with the process, talk with a tax professional who has penalty abatement experience.

How do I get the IRS to waive penalties?

You can write a letter to the IRS, you can call and ask for abatement, or you can file Form 843 to request penalty relief. A tax pro can also contact the IRS on your behalf.

Joshua A. Webskowski, EA, USTCP explains why written requests are often more effective:

“A written penalty abatement request is usually more effective because it is entered into the IRS system, allows you to present facts in an organized way, and lets you attach supporting documents. While calling can sometimes result in a more efficient resolution for FTA (first-time abatement) approval, anything beyond that requires hard written evidence.

I often advise to start with a call to explore what options may be available, then follow up with a strong written request that’s supported by documentation.”

Albert E. Lockwood IV, EA offers a tactical phone-based approach that can yield results quickly:

“My experience is that it’s always better to call — and possibly call more than one agent — to get what you want. The agent will then tell you if they’re able to abate the penalty over the phone or if you need to submit a written request and what needs to be included in it.”

According to Luca Pizzale, EA, “If possible, a phone call can resolve everything same-day; it is one of the most effective and efficient tools we have — especially for first-time abatement or smaller penalties.”

Are there tips to help with penalty abatement?

On Quora, a former IRS employee weighed in on the best way to get penalties abated. She simply said to be nice. She wrote that if people call in and are rude, the IRS employee will fill out the penalty abatement request, but she continued to say that if the taxpayer is polite, the employee will fill out the request and also look for loopholes to help the taxpayer. Keep this tip in mind when writing your letter and/or if you call the IRS about the penalty waiver.

Are there other ways the IRS will forgive taxes owed?

The IRS doesn't necessarily advertise forgiveness programs, however there are some solutions that allow the taxpayer to pay less than the total amount owed. Below is a brief overview of these options.

• Offer in Compromise: To qualify, you need to meet specific requirements, and even then, the IRS still may deny your offer. Generally, with this option, you must prove to the IRS that you will never have the means to pay them the taxes you owe before the statute of limitations expires. 
• Partial Payment Installment Agreement: This option allows you to pay a lower monthly amount than a standard installment agreement. Generally, the amount that is paid monthly will not pay off the entire balance of the taxes due before the statute of limitations expires on the debt.
• Currently Not Collectibe Status: You can prove to the IRS that you don't have the means to pay the taxes owed. If you did pay what you owed, even in an installment agreement, this would cause financial hardship. Once in this status, the IRS does not require you to make payments. The taxes are still technically owed, but no collection actions will happen other than a possible lien filed and penalties and interest accruing. The statute of limitations may expire before someone gets out of this status. The IRS will require taxpayers to pay if their financial situation improves. 

Success Stories: How Tax Pros Get IRS Penalties Removed

Joshua A. Webskowski, EA, USTCP helped a taxpayer overcome penalties tied to the sale of multiple properties after a personal tragedy:

“One of the most meaningful cases I handled involved a taxpayer who sold both his primary residence and an investment property in the same tax year. He had recently lost his wife and was trying to start fresh with his adopted daughter.

He failed to provide basis information, resulting in failure-to-file, failure-to-pay, and substantial understatement penalties. By the time he reached out, a Notice of Deficiency had been issued.

We filed the missing returns and submitted a penalty abatement request with his wife’s death certificate and medical records. When the IRS denied the request, we filed a petition in U.S. Tax Court. An experienced Appeals officer ultimately agreed to abate all penalties.

This case shows how persistence and proper documentation tied to IRS standards can lead to a full resolution—even in difficult cases.”

Albert E. Lockwood IV, EA successfully challenged one of the IRS’s most serious penalties:

“I was able to get a fraud penalty removed for a client by proving the taxpayer did not act with negligence. The fraud penalty is one of the most severe—it’s 75% of the balance due. In this case, I helped the taxpayer avoid over $600,000 in penalties.”

Help With Penalty Abatement Using TaxCure

At TaxCure, we have a large network of professionals from around the country who can help with a wide variety of tax problems. We have a unique algorithm to help display only professionals who have the experience to help with your particular problems. If you are looking for assistance from a tax professional who has penalty abatement experience, you can use this link to view the top-rated pros who can help, or you can start a search below:

Disclaimer: The content on this website is for educational purposes only. It does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

IRS Verified Financial Installment Agreement

A verified financial installment agreement is simply an installment agreement that requires financial disclosure in order to be approved. This is not the name of an official IRS installment agreement. Rather, it's a descriptor used when a taxpayer sets up an installment agreement and the IRS requires a collection information statement. The info on the statement helps the IRS verify your financial situation, and it reassures the IRS that you're making the largest payment possible. 

Key Takeaways

• Who? Taxpayers who owe over $250,000 (sometimes required if owe over $50,000) or are assigned to a revenue officer.
• What? A verified installment agreement is when the IRS verifies your financial info before letting you set up a payment plan.
• Why? The IRS verifies your details to ensure you're paying the most you can afford.

Which Individuals Need a Financially Verified Installment Agreement?

Generally, if any of the following statements apply, you will need to disclose details about your financial situation in order to obtain an installment agreement.

• The minimum payments you propose are not enough to pay off the tax debt within 10 years or if sooner, by the Collection Statute Expiration Date (the last day the IRS can legally collect the debt).
• You owe over $250,000. Most of the IRS websites and installment agreement applications say that you must provide financial verification if you owe over $50,000, but in practice, the agency often lets taxpayers set up payments on up to $250,000 in tax debt without a financial disclosure, unless their account is assigned to a revenue agent or they have a history of default.
• You have defaulted on a payment plan in the last 12 months.

Financial Verification Requirements for Businesses

The IRS has much more stringent requirements for businesses. Typically, businesses must submit financial verification to set up payments if they:

• owe over $25,000 in payroll or other trust fund taxes or over $50,000 in other business taxes
• have a history of defaulting on payment plans
• have been pyramiding payroll taxes, which is when you open and close businesses to avoid paying
• trigger other requirements for a collection information statement, such as a revenue officer assignment

Why Does the IRS Require Financial Verification?

The IRS wants to take a look at your finances to ensure that you are paying the most you can. When you're dealing with this level of debt, the IRS wants to ensure that you're not just delaying paying as a form of credit while you use your money for other purposes. The agency also wants to ensure they're receiving the highest payments possible.

Additionally, there are also practical reasons why the IRS only requires verification if you owe over a certain threshold. It's simply too labor-intensive to require collection information statements on lower levels of tax debt. In fact, to save time and resources, the IRS changed its procedures for a few years around 2021. Starting around that time, if you owed less than $250,000, you did not have to provide a collection information statement unless you had a history of default or were working with a revenue officer who required a collection statement.

As of early 2026, the instructions for the Form 9465 (updated in July 2024) indicate that the IRS now requires financial verification on all payment plans on tax debts over $50,000 as well as in the other scenarios outlined above. These instructions tend to be inconsistent with the realities that tax attorneys report when working directly with the IRS — as noted throughout this post, attorneys often find that the IRS will approve payment plans without financial verification if you owe under $250,000 in individual tax debt. 

What Is a Collection Information Statement?

A Collection Information Statement (CIS) includes information about your assets, income, liabilities, and expenses. Generally, the IRS requests Form 433-F for verified installment agreements, but if a revenue officer wants more detailed information, they may request Forms 433-A or 433-B. 

If you are required to submit this statement, it is highly recommended that you use a licensed tax professional if you want to improve your chances of success with your application. Although the CIS is full of numbers, a lot of the information is subjective. There are also ways to optimize the outcome to the taxpayers' benefit.

For instance, let's say that you list a piece of heavy machinery like a dump truck on your CIS. The IRS may see this asset and demand that you sell it or take a loan against the equity. However, a skilled tax professional may be able to convince the IRS that you need the excavator for work, and its equity should not be considered when calculating your monthly payment plan amount. 

Types of Installment Agreements That Require Financial Verification

Here are the general requirements for an installment agreement requiring financial disclosure:

• Businesses that owe over $50,000 ($25,000 if trust fund taxes) 
• Individuals who owe over $250,000 (sometimes over $50,000).
• Businesses or individuals who have defaulted on an installment agreement in the last few years.

Additionally, you must meet the following criteria if you want to set up any type of payment plan, whether it's verified or not.

• Cannot be in bankruptcy.
• Have not had an Offer In Compromise accepted on the tax balance that you want to make payments on.
• Completed the previous six years of tax returns — or completed the last five and filed an extension for the latest year.
• Compliant with IRS payments in the past.

Generally, the IRS requires you to pay all new tax balances when you have an existing payment plan. If you don't pay after the IRS issues a demand for payment, the agency can terminate your installment agreement — in fact, this is the most common reason for termination. However, there are rare exceptions where new tax liabilities can be rolled into existing Installment Agreements.

Will the IRS require financial verification if I don't set up direct debit?

Generally, no. The IRS will not require financial verification in lieu of direct debit. However, prior to 2025, the IRS required financial verification from individuals who owed over $25,000 and businesses owing over $10,000 if they didn't pay by direct debit. That is no longer required. Created in 2025, the simple payment plan lets you set up payments on up to $50,000 in debt without financial verification. 

How To File a Verified Financial Installment Agreement for an Individual

If you owe less than $50,000, you can start the application process online, and then the system will prompt you to complete a collection information statement if needed. Typically, you will need to complete that on paper and mail it to the IRS or call them with the information. However, that is rare — about 90% of taxpayers will be able to complete the online application without financial verification. If you owe more than $50,000, you can do the following to apply:

• Fill out Form 9465 (Installment Agreement Request)
• Print and complete IRS Form 433 (Collection Information Statement). 
• If you have defaulted in the last 12 months and owe between $25,000 and $50,000, complete Part II of Form 9465 instead of Form 433-F.
• Mail the form to the IRS or call 1-800-829-1040 to provide the information over the phone.

If you're filing a tax return and want to set up payments on that tax liability, you can attach the Form 9465 to your tax return. Most tax prep software even lets you fill it out to file electronically. Typically, the IRS requires Form 433-F, but if a revenue officer is handling your account, you may need to file Form 433-A instead. 

How to Provide Financial Verification for a Business

The IRS uses Form 433-B to financially verify businesses. Again, the debt levels at which businesses need to file a financial verification statement are much lower than for individuals. Also, businesses generally need to interact directly with the IRS to set up payments. At the time of writing, businesses may set up an in-operation trust-fund express agreement to pay up to $25,000 in trust fund taxes over a 24-month term. They can also qualify for a Simple Payment Plan, which provides up to 10 years to pay and doesn't require a trust fund agreement, but it does require a phone call to the IRS. 

Special Instructions for Form 433-F

Many individuals need to complete Form 433-F. Here is an overview of what to expect on that form. Note that this is very similar to the information requested on Forms 433-B and A. 

• Part A: Accounts and Lines of Credit. List all your financial accounts such as checking accounts, IRAs, 401ks, brokerage accounts, etc. You need to include at least 90 days' worth of statements for all of these accounts.
• Part B: Real Estate. Note your properties including your primary residence, vacation homes, and timeshares. Then, list your monthly payments, and write the equity of each property. Equity is the value of the property minus what you owe on it.
• Part C: Other Assets. This includes automobiles, boats, and life insurance policies. You also have to note monthly payments and equity.
• Part D: Credit Cards. List all credit cards, their balances, and your minimum monthly payments. This includes store cards.
• Section E: Business Information. Note any accounts receivables owed to your business and include information about whether or not your business accepts credit cards.
• Part F: Employment Information. Share details about your income and your spouse’s income. You need copies of your paystubs and contact details for your employers. You also need to note how often you get paid.
• Part G: Non-Wage Household Income. Detail other sources of income. This includes alimony, child support, self-employment income, rental income, and pension. It also includes unemployment income, social security payments, and interest and dividends.
• Part H: Living Expenses. Explain what you need to live on and fill in your dependents.  This section includes monthly expenses for rent, food, transportation, mortgages, student loan payments, medical bills, and more. You also need copies of bills for the last three months.

What If You Need to Change Your Agreement?

To make changes to a financially verified installment agreement, you may need to complete a new financial information statement. The IRS may require this if you reduce the monthly payment or need to add a new balance to your existing agreement. However, if you simply want to change the date of your withdrawal or update your bank account details, you can usually do that online.

Alternatives to Verified Installment Agreements

An installment agreement is the most common way that people resolve their tax debts. However, it is not the right decision for everyone, and in fact, the Taxpayer Advocate Service (TAS) says that about 27% of people who set up installment agreements may have qualified for an offer in compromise or currently not collectible status. To ensure that you're making the right decisions for your finances, you may want to consult with a tax professional. They can look over your situation and provide you with customized guidance.

If the IRS is requiring financial verification, you probably owe an uncomfortable amount of money. If you cannot pay off the balance by the end of the collection period, you may qualify for a partial payment installment agreement. In fact, when you complete the application process explained above, the IRS will let you know if you qualify for a PPIA. If so, you will make small monthly payments, and then, any debt remaining at the end of the collection period will be eliminated. However, if your ability to pay improves while you're on the payment plan, the IRS may require larger payments or payment in full.

As indicated above, you may also want to consider an offer in compromise. That is where you make a lump sum payment, and the IRS waives the remaining portion of the debt. Cannot afford to pay anything, right now? Then, you may want to look into currently not collectible. With that option, you provide a collection information statement, and once you prove that you cannot pay, the IRS stops all collection actions against you.

Use TaxCure to find a licensed tax pro in your local area. A tax pro can help you identify the best option in your situation and execute the plan. They can also guide you through state tax debt and help with any other tax problems you have. Using TaxCure, you can narrow down the results to find someone who has the particular experience you need.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney within our network.

Classic IRS Innocent Spouse Relief Requirements

Apply for Tax Relief Under Section 6015 B of IRS Code

Innocent spouse relief is an IRS program designed to protect people who are facing a tax debt due to their former spouse or spouse's actions. To qualify as an innocent spouse, you must establish that your spouse/former spouse is solely responsible for the tax liability, penalties, or interest from your joint return. If you are the responsible party, you can't qualify for this program. To help you out, this guide looks at the innocent spouse relief requirements so you can start to decide if this might be an option for you. 

Requirements for Innocent Spouse Relief

To qualify for innocent spouse relief, you must meet a range of requirements. If you don't meet all of the requirements explained below, you will not be able to obtain this type of relief, but in that situation, you may want to look at the other two types of innocent spouse programs. Note that with this type of relief, married taxpayers who live with their spouses can request innocent spouse relief, but with some of the other options, your marriage must be over.

You Filed a Joint Tax Return for the Year You Are Seeking Relief

You must have filed a joint tax return for the year you are seeking relief. Legally, when you file a joint return, you and your spouse become jointly and severally liable for the tax debt. This means that the IRS can hold you both responsible (jointly), but it can also hold you individually (severally) responsible.

To give you an example of joint and several liabilities, imagine that you sign a joint tax return that says you and your spouse owe $10,000 in tax. All of the tax owed is due to your spouse's business. You owed some tax during the year, but you already paid it from the money withheld from your paycheck throughout the year. Normally, it doesn't matter that the bill was just due to your spouse. By signing the joint return, you become responsible for the bill. The IRS has the right to go after you personally for the whole thing. However, this rule isn't necessarily fair, and that's where innocent spouse relief comes into play. If you can prove that you shouldn't be responsible for the bill, you can get relief.   

The rules are different in community property states such as Wisconsin. Innocent spouse relief in community property states is complicated, and it often only comes into play when you file as married filing separately. You can find more information about community property states here on the IRS's website.

The Tax Return Has an Understatement of Tax

The joint return must contain an understatement of tax. That means that the joint tax return says you owe less tax than you really do. This can happen due to unreported income, inflated deductions, incorrect basis, or erroneous credits. Here are some examples. If your spouse didn't report income from lottery winnings or a side business, the joint return has underreported income. An inflated deduction may apply if your spouse makes up business deductions or claims deductions for expenses they didn't pay. If your spouse sells a property and claims they originally paid more than they did to minimize the capital gains, that is a case of incorrect basis.  

You Blame Your Spouse or Former Spouse

An error caused by your spouse or former spouse is the reason for the understatement of tax on your joint tax return. As indicated above, that may include underreporting income, claiming the wrong deductions, or over-claiming deductions or credits. Other examples may relate to using the wrong basis for claims related to capital gains or losses, as well as math errors. However, simply blaming your spouse is not enough. You must meet other requirements.

To illustrate, let's say that your spouse claimed a $5,000 business deduction for dog food because they said that the dogs were guard dogs for your home-based business. You didn't really agree, but you signed the return anyway. Then, the IRS audited the return, disallowed the expense, and sent you a bill for the tax. Unfortunately, in this situation, you can't claim that you're not responsible because the deduction was your spouse's idea. Unfortunately, since you knew about the issue when you signed the return, you cannot apply for this type of spouse relief. However, you may be able to get separate liability relief or equitable relief — especially if you signed the return out of fear or under duress. 

You Were Unaware of the Understatement of Tax

Plain and simple, this rule means that you did not know about the unreported income or any other erroneous item(s) when you signed the return. In other words, you had no actual knowledge of the issue and no reason to know about it. This is where innocent spouse relief claims can get very tricky. The IRS has strict definitions around the concepts of actual knowledge and reason to know, but this is also a subjective issue which is why you need a skilled tax pro to help you.

To be declared an innocent spouse, you must be able to prove that you didn’t know about the issue. Furthermore, you must show there was no reason why you would have known. To give you a very basic example, imagine that your spouse was running a secret business to support a secret gambling addiction and they didn't report the income. In this case, it may seem reasonable that you didn't know. However, if your spouse was earning an extra $100,000 a year that was paying for family vacations, home remodels, and other expensive items, you probably should have wondered where all the extra money was coming from. You will remain jointly responsible if the IRS thinks that a reasonable person should have known. This is one of the most common rejection reasons.

When deciding if you should have known about the issue, the IRS considers many factors. For instance, the IRS will consider your spouse’s finances, your educational background, and your business experience. For instance, if you're a lawyer or you have a master's degree in business but you didn't sign a tax return for the last five years, you may be able to argue that you didn't know about the situation, but the IRS will counter that due to your educational background, you should have asked questions about why there wasn't a tax return to sign. In other words, the IRS will claim that you had a reason to know about the issue due to your education. Moreover, the IRS will look at patterns in previous years, and whether you participated in the activity related to the error. The IRS will also consider if you benefited from the understatement of tax.

It Is Truly Unfair to Hold You Responsible for the Tax Liability

There is a significant amount of interpretation in regards to this element. The IRS looks at a number of factors including whether you benefited (indirectly or directly) from the understated tax. The IRS will also look to see if you received a significant benefit. This is a benefit(s) in excess of normal support. For example, if you acquired certain assets, property rights, or money after the filing of the return, the IRS may say that you received a significant benefit.

When you apply for relief, you must reveal if your spouse transferred any property to you. Even if you didn't know about the issue and it was solely your spouse's fault, a property transfer can show that you benefited from the understatement of tax on the joint tax return. For instance, say that your spouse underreported tax in 2018, and you didn't know about it. Then, in 2019, your spouse gave you a sports car, and its cost was substantially more than your spouse could normally afford based on their reported income. In 2020, you got a divorce. The next year, the IRS comes after you for the tax debt. You claim you didn't know about the tax bill, but the IRS looks at the car and begs to differ. These are the types of complex issues that IRS takes into account when assessing the issue of fairness.  

The agency also takes into account if you’re widowed, divorced, separated, and if your spouse left you. Here's another example. Imagine that your spouse lied to you about underreporting income. Then, they fled the country or died unexpectedly. You don't have the resources to pay for the tax bill, and you didn't have any reason to know that your spouse was lying on the returns. In this case, it probably would be unfair or inequitable to hold you responsible.

The agency also takes into account personal details about your relationship. The IRS wants to see if there has been a pattern of your spouse lying and deceiving you. When you apply for innocent spouse relief, you can also explain if your relationship was abusive. If desired, you can have the abuse noted on your account, and the IRS agents who contact you will be sensitive about this personal issue. However, you don't have to note abuse on your account if you don't want to.

What if it would be unfair to hold you responsible but you don't meet the other requirements? In this case, you should check out equitable relief. Innocent spouse based on equitable relief really focuses on the fairness issue. For instance, this may apply in cases where you knew about the issue but you were forced to sign the joint tax return. You have a little more leeway on some of the above requirements when you use the equitable relief category, but you can only apply if you are separated or no longer married.  

The IRS Began Collection Activities Less Than 2 Years Ago

For you to qualify as an innocent spouse, it must be less than two years since the IRS first attempted to collect these taxes from you. Note that the clock starts running when the collection actions start, not when the return was filed. For instance, collection actions may include the IRS taking you to court for the tax bill or seizing your tax refund because you owe tax due to an understatement on a previous year's jointly filed return. To be on the safe side, you should reach out for help as soon as you suspect an issue. You don't want to miss this window of opportunity. 

Partial Innocent Spouse Relief 

Innocent spouse relief isn't all or nothing. In some cases, you may qualify for partial relief. This applies when you knew about part of the understatement but not all. To give you an example, imagine that your spouse earned $80,000 in a side business, and they didn't report the income on your tax return. You knew that they earned $10,000 on the side, but you had no knowledge of the other $70,000 because they were very deftly hiding it from you. In this case, you can make a strong argument that you deserve relief from the tax due to the $70,000 of unreported income. If the IRS grants your request, the agency will hold you responsible for the tax related to the $10,000 but not the remaining $70,000.

If you meet all of the above requirements, there is a strong possibility you will find relief. If the IRS accepts your request, you are no longer liable for the tax debt, interest, or penalties related to the understatement of tax. However, if you do not meet the requirements above, you can look at other forms of Innocent Spouse Relief such as separation of liability or equitable relief. Separation of liability breaks down the details on the return so that you are only responsible for the taxes related to your portion of the income. Equitable relief can apply in situations where the tax was understated or underpaid due to your spouse or ex-spouse's actions, and it would be unfair to hold you responsible. 

If you are looking for a tax professional that has experience with Innocent Spouse Relief, you can find a list of tax professionals that have experience with innocent spouse relief here. Or you can start your search below to find the top-rated professional based on your unique tax situation. Once you find a local tax professional that meets your needs, you can contact them directly. Most tax pros start with a free consultation, and they can help you decide if the innocent spouse program is right for you or if you should take another approach. In many cases, you may end up using multiple programs. For instance, you might apply for innocent spouse relief on some of the tax bill, but then, you might also need to set up payments on the remaining liability. 

IRS Installment Agreements: Set Up Payments Online or With Form 9465 

If you cannot pay your taxes in full, you may want to set up an installment agreement. This type of payment plan lets you make monthly payments on your tax debt until the bill is paid in full. You will incur interest and a small monthly penalty while on an installment agreement, but as long as you make your monthly payments, the IRS will not initiate any involuntary collection actions against you. 

This guide outlines the different types of payment plans, how to apply, what to expect while making payments, and how to appeal if the IRS rejects your request to set up or modify an installment agreement. To get help applying for a payment plan or to talk about other options, use TaxCure to find a tax pro in your area today. 

Use this table of contents to navigate to the subsections of this article:

Table of Contents

• What Is an IRS Payment Plan?
• Types of IRS Payment Plans
  • Online
  • Guaranteed
  • Simple Payment Plan
  • Non-Streamlined
  • Partial Payment
  • Payroll tax installment agreement
  • Streamlined
• Tool: What Type of Payment Plan Should I Apply For?
• When to Apply for an IRS Installment Agreement
• How to Apply for an IRS Installment Agreement
• What to Expect When You're on an IRS Installment Agreement
  • Interest rates
  • Consequences of missing a payment
  • Rolling new tax debt into your payment plan
  • Making changes to your installment agreement
• Appealing a Rejected or Teminated IRS Installment Agreement
• FAQs About Installment Agreements

What Is an IRS Installment Agreement? Definition and Alternatives

An IRS installment agreement is a monthly payment plan for tax debt. The IRS offers several types of agreements with different application requirements. If you owe $50,000 or less and can pay off the balance within six years, you can usually set up an installment agreement pretty quickly and easily. However, if you owe over that threshold, need longer to pay, or have a history of defaulting on these agreements, you will need to give the IRS detailed financial information before they approve your request. There are different rules for business taxes as outlined below.

An installment agreement is the most common type of tax relief, but for an installment plan to work, you need to be able to afford the payments every month. If you don’t have any disposable income, you may want to pursue other options such as establishing yourself as not-collectible status (CNC) or applying for an offer-in-compromise (OIC). Research from the Taxpayer Advocate Service indicates that over a quarter of people who set up installment agreements on their tax debt in 2022 could have qualified for CNC or an OIC. To ensure you're setting yourself up for success, you may want to consult with a tax pro about your options.

Types of IRS Installment Agreements for Individuals and Businesses

Comparison of IRS Installment Agreement Options

To meet the diverse needs of taxpayers, the IRS offers a few different types of Installment Agreements. All of these agreements share one critical feature – in exchange for you agreeing to make monthly payments, the IRS agrees to stop collection actions against you. The differences in these plans is how you apply and the type of information you need to provide to get approved. Here is a brief overview and links to resources with more information — be aware that some of these categories overlap.

• Online Payment Agreement – If you owe under a certain threshold and are up to date on your filing requirements, you can apply for an installment agreement online through the IRS's website. You can use this option to set up a short-term payment agreement if you owe under $100,000 and can pay off the balance within 180 days, or if you owe under $50,000, you can set up a long-term payment plan. Businesses that owe under $25,000 in trust fund taxes can apply online as well. 
• Guaranteed Installment Agreement – This installment agreement offers “guaranteed” approval as long as you meet the requirements: 1) You owe $10,000 or less in taxes, 2) You can pay off the taxes within three years or before the collection statute expiration date (CSED) whichever comes first, and 3) You're up to date on filing your tax returns.

• Simple Payment Plan – Individuals can take up to 10 years (or until the collection statute expiration date if sooner) to repay up to $50,000 in tax debt, penalties, and interest. Businesses can qualify if they owe up to $25,000 in trust fund taxes (e.g., excise or payroll tax) or up to $50,000 in non-trust fund taxes. Sole props that are no longer operating can set up payments as a business if they owe up to $50,000 in trust fund taxes, or they can apply as individuals if they owe up to $50,000 in non-trust fund taxes.  

• Non-Streamlined Agreement – If you owe over $50,000, you can apply for a non-streamlined installment agreement (NSIA). This installment agreement was named non-streamlined because, in the past, you used to have to submit a collection information statement. Now, that's usually not required unless the taxpayer is requesting a release of a levy or their debt has been certified as seriously delinquent to the State Department. However, if you set up this type of payment plan, the IRS will most likely file a federal tax lien against you — note that there are exceptions. 

  Generally, if you owe under $250,000 in individual tax and your case has not been assigned to a revenue officer, you don't have to provide a collection information statement. In contrast, if you owe over $250,000 or if a revenue officer is working on your case, the IRS will generally request a collection information statement (Form 433). Typically, businesses must submit financial details if they don't qualify for a simple payment plan or the express option. 

• Partial Payment Installment Agreement (PPIA) – If you cannot afford the minimum monthly payments on a regular installment agreement, you may want to apply for a PPIA.  This type of IRS installment agreement allows you to make monthly payments you can afford. When the CSED arrives, the debt expires, and you don't have to pay the rest. Because you're paying less than you owe, it is more time-consuming to obtain this Installment Agreement.  You have to submit a lot of financial information to the IRS for the agency to consider and prove you cannot make regular monthly payments.

• Express installment agreements for trust fund taxes – If your business owes payroll or excise taxes, you will generally need to apply for a special installment agreement just for payroll taxes. The IRS's express option is for payroll or other trust fund tax debts under $25,000 that can be paid in two years. 

• Streamlined Installment Agreement – As of 2026, the streamlined agreement has been phased out at the IRS. In 2025, the IRS replaced this option with the Simple Payment Plan for individuals, and in 2026, the IRS offered the Simple Plan to businesses with slightly different criteria as well. Historically, however, the IRS offered the streamlined option to individuals and businesses who owed up to $50,000 ($25,000 for trust fund taxes) and needed up to six years to pay.  

Those are the main types of IRS Installment Agreements. However, you may also hear about direct debit agreements and financially verified agreements. These categories overlap with the categories above. For example, any payment plan that is paid with direct debit from your bank account can be referred to as a direct debit payment. Similarly, any installment agreement that requires a financial disclosure can be referred to as a financially verified installment agreement.

Tool: What Payment Plan Should You Apply For?

Use this tool to help determine your eligibility and guidance on what you should apply for when setting up an installment agreement with the IRS.

This tool is for informational and educational purposes only and does not constitute legal or tax advice. Always consult a qualified tax professional regarding your specific situation. Use of this tool is at your own risk.

This tool is for educational use only and not tax or legal advice. Consult a professional for your situation.

What is a Direct Debit Installment Agreement?

A direct debit installment agreement (DDIA) is an installment agreement where the taxpayer makes monthly payments via direct debit. That means payments are withdrawn directly from your bank account. In certain cases, especially for business taxpayers or individuals with a history of default, the IRS may require direct debit payments. Alternatively, you can use a payroll deduction to make automatic payments – that's where your employer withholds your payments from your paycheck and sends them to the IRS. 

Generally, if you owe more than $50,000, the IRS prefers direct debit payments, but in the interest of practicality, the agency doesn't always require them. Note that if a revenue officer is assigned to your case, they may require you to set up direct debits if you have defaulted on an installment agreement in the past.

What Is a Financially Verified Installment Agreement?

A Verified Financial Installment Agreement is a type of installment agreement that requires the disclosure of financials through a collection information statement. You may need to provide financial verification if:

• you owe over $50,000 (over $25,000 in trust fund taxes),
• you have a history of defaulting on installment agreements,
• you cannot afford the minimum monthly payments.

Note that sometimes, you can owe up to $250,000 and not be required to submit a financial disclosure. However, you may have to push for this option, as many IRS employees believe the threshold is $50,000, although that was phased out around 2022. Revenue officers may also require financial verification at their discretion. Generally, the sooner you apply and the less you owe, the less likely you are to be required to provide financial details. 

These payment plans require more effort and generally more paperwork. You need to provide comprehensive information about your assets, liabilities, income, and expenses to the IRS. Typically, the IRS uses Form 433-F, but if you are working with a revenue officer, they may request Form 433-A for individuals or Form 433-B for businesses. 

When to Request an IRS Installment Agreement

You may want to consider an Installment Agreement in the following situations:

• You cannot afford to pay in full and want to spread out payments over time.
• You do not qualify for a settlement through the offer-in-compromise program.
• You cannot borrow money to pay your taxes, or if you have a loan option, the interest rates are higher than the IRS's interest rates.

Check out the resource link above if you want to know more about when to request an Installment Agreement, how to request it, and the type of agreement you should select.

How to Apply for an Installment Agreement

You can apply for an installment agreement online, through the mail, over the phone, or in person. Here are brief instructions on each of these options.

Apply Online – Set up an IRS online account by verifying your identity with ID.me. You need a smartphone, a photo ID, and an email address, and you may have to answer some questions about your credit report to verify your identity. This option is for individual taxpayers who owe under $50,000 or businesses owing up to $25,000 that want to apply for the two-year express option.

If you can pay within 180 days of the due date, you can set up a short-term payment plan online for tax debt up to $100,000. A short-term payment plan is basically a promise to pay within the next six months. You don't have to make monthly payments. 

Apply Through the Mail – If you don’t want to use the IRS’s online tool to request a payment plan or you owe too much money to use the online tool, you can fill out and mail in IRS Form 9465 (Installment Agreement Form). This form is mainly for individuals. Businesses can use this form if they are out of business or if they only owe income tax. When you complete the form, it will indicate whether you also need to file Form 433-F.  

Apply Over the Phone – You don't have to mail in Form 9465. Instead, you can call the IRS and give them the info from this form over the phone. Then, the agency will approve the request on the phone call or let you know if you need to provide additional information. 

Apply In Person – There are IRS offices in every state and multiple offices in some states. Most offices let you apply for an installment agreement in person, but you may need to make an appointment. Check with the IRS Office Locator to look at the services and options of the office closest to you.

What to Expect While You're on an Installment Agreement

While you are making payments, the IRS will not garnish your wages, seize your bank account, or take other collection actions, but in some cases, the agency may issue a tax lien, particularly if you owe over $250,000 or have a history of defaulting on payment agreements — sometimes, the agency will issue a lien if you owe over $50,000, and if you're not proactive about setting up payments, they may issue a lien anytime you owe over $10,000. If a lien was issued before you set up payments, the IRS may agree to release it if you set up a payment plan and make three satisfactory payments. Unfortunately, you will incur interest and a small penalty while you're on the payment plan. 

The IRS allows you to make certain adjustments to your payment plan, but if the adjustments run counter to your original agreement, you may need to provide financial details. Missing a monthly payment or incurring new tax debt puts you in default of your agreement, but in both of these cases, the IRS will generally work with you (and let you stay on the payment plan) as long as you proactively address the situation. Here are more details and links to more information.

Interest Rates on Installment Agreements

When you are on an installment plan, interest and penalties continue to accrue on the balance. The interest rate updates quarterly, and it's the federal rate plus three points. The late-payment penalty is only 0.25% per month, up to 25% total. 

On IRS Installment Agreements, interest compounds daily.  As a result, sometimes taking out a loan, and repaying the lender can save you money compared to making payments to the IRS. If you can get a loan with a lower interest rate, you may want to consider that instead of an installment plan.

Consequences of Missing a Monthly Payment

When you sign up for an installment agreement, you agree to fulfill the terms and conditions set out by the IRS. Regardless of which type of payment plan you have, missing even one payment means defaulting on that agreement and dealing with whatever consequences may follow. The outcome of missed or late payments depends largely on what you do after missing a payment and how quickly you reach out to the IRS. Generally, there are ways you can reinstate your installment agreement if you make up the missing payment quickly.

Typically, if you miss a payment, the IRS will send you Notice CP523. This notice will tell you the past due amount, and it will give you a deadline. As long as you pay by then, your payment plan should stay active.

Incurring New Tax Debt – Rules About Multiple IRS Payment Plans

When you set up a payment plan, you agree to stay compliant with future tax obligations. But what if you get ready to file a return and realize that you can't pay? In that situation, you may wonder if you can set up two payment plans with the IRS. Strictly, the terms of your installment agreement state that the IRS can put you into default and demand payment in full if you incur a new tax debt. However, in practice, the IRS is often willing to add new tax debt to your existing payment plan. The best move is to contact the agency or a tax pro proactively before the taxes are assessed. That increases your chances of approval. 

Note that an individual or a non-pass-through business can only get a single payment plan. Even if they owe taxes from multiple years, they will make payments on just one installment agreement. However, if you owe taxes on both the individual and corporate levels, you may be able to set up a separate payment plan for the two different tax debts. That is because different entities are involved. If you have a pass-through business, such as a partnership or a sole proprietorship, you will typically pay those taxes as an individual.  

Making Modifications to Your IRS Installment Agreement

Once you set up your payment plan, you can make many changes through the online system. Online, you can typically select a new payment date, change your payment amount, or update your banking details. You may also be able to increase the length of your payment term or add a new balance to your existing plan. However, in some cases, the IRS may require you to call and request changes and/or you may need to complete a financial statement. Sometimes, you can request changes using Form 9465.

Appealing an IRS Installment Agreement

If the IRS rejects your Installment Agreement, you can appeal. You can also appeal if the IRS terminates an existing agreement or refuses to accept your request for modifications. The resource linked above takes a look at that process.

Frequently Asked Questions About Installment Agreements

What if I can't pay taxes in full?

The IRS may allow you to set up an installment agreement. The IRS offers a variety of different payment plans with different terms, and you may be able to get up to 10 years to repay back taxes.

How do I apply for an installment agreement?

You can apply for an installment agreement on the IRS's website, by filing Form 9465, or by calling the IRS. You can also go to an IRS office to request payments in person. If you're e-filing a tax return and you want to set up payments, you can attach Form 9465 to your return electronically, or you can ask your tax preparer to do this for you.

What if I cannot afford an installment agreement?

If you cannot afford to make payments, you may want to look into an offer in compromise. That's where you make a lump sum payment, and the IRS waives the rest of the balance due. Alternatively, if you have very limited income and assets, you may be able to get your account marked as currently non-collectible. That way, you don't have to make payments, but the IRS also won't try to collect the debt from you.

Why did the IRS reject my installment agreement?

The IRS may reject your installment agreement request if you have unfiled returns, your financial statement indicates that you can afford to pay in full, or you have a history of defaulting on payment plans. Find out why the IRs rejected your payment plan and see if you can rectify the situation. If not, reach out to a tax pro for help. 

Can I change my payment plan?

You can make some changes to your payment plan online, by filing a new Form 9465, or by calling the IRS. If your change results in you paying less than the required minimum payment, the IRS may require you to fill out financial forms. 

Check out the link above to see more common questions and answers about IRS Installment Agreements.