Installment Agreement: This is a monthly payment plan that you setup with the IRS to pay off your debt. The catch is that the IRS determines what the payment amount will be per month. This monthly amount could still be more than you are able to afford.
The IRS will take a close look at your financial situation, determine your disposable income, and set your monthly amount. Therefore, making a valid case when you apply for an Installment Agreement is very important. Additionally, the amount you pay monthly must satisfy the entire tax debt within three years. In order to apply, fill out IRS Form 9465 (Installment Agreement Request).
The IRS is obligated to accept your installment agreement if you meet certain criteria: Your total tax debt is less than $10,000 and the monthly payments will fully satisfy your tax debt within three years.
Note: The IRS will not approve your installment agreement if you have not yet filed all your tax returns. You will need to file all your back taxes before requesting a monthly payment plan.
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