What is an installment agreement?

An installment agreement is a formal arrangement with the IRS to pay tax debt over time through monthly payments rather than in a lump sum. For professional service firm owners facing unexpected tax liability, installment agreements provide a manageable payment path while avoiding more severe collection actions.

Key characteristics

• Monthly payment arrangement

• IRS-approved plan

• Interest continues accruing

• Setup fee applies

• Various plan types available

• Avoids liens and levies

Why it matters for professional service firms

Installment agreements prevent IRS collection actions while you pay off debt. Ignoring tax debt leads to liens, levies, and garnishments. Professional service firm owners who cannot pay in full should request installment agreements rather than ignoring the obligation.

Real-world example

Lisa owed $42,000 after underestimating quarterly payments. Unable to pay in full. Applied for installment agreement online: setup fee $130, monthly payment $1,200 over 36 months, interest accruing at current rate. The agreement prevented lien filing and allowed continued business operation. Paid off in 32 months with extra payments when cash is available.