Taxpayers and their tax professionals now have a new option for clients facing tax debt: the Simple Installment Agreement. Introduced by the IRS and effective March 5, 2025, this program replaces the old Streamlined Installment Agreement for individual taxpayers, offering more flexible payment options and better terms for those who want lower monthly payments and want to avoid a Notice of Federal Tax Lien.

What is the Simple Installment Agreement?

The Simple Installment Agreement or “Simple IA” modifies the prior Streamlined Installment Agreement terms for taxpayers who owe $50,000 or less to the IRS. The IRS provides guidance on this new payment plan option in its March 3, 2025, Office of Chief Counsel Memo SBSE-05-0325-0008.

Here are the terms of the Simple IA:

• Eligibility: Taxpayers with an assessed balance of up to $50,000. Note, the assessed balance does NOT include the accrued penalties and interest after the initial tax assessment (i.e., a filed tax return that assesses tax).
• Duration: Allows payment plans of up to 120 months, or until the IRS collection statute expiration date (“CSED”), whichever is the shorter timeframe.
• No tax lien filing: If the agreement is set up before a Notice of Federal Tax Lien is filed, taxpayers can avoid a lien entirely, even without using a direct debit payment method.
• Broad accessibility: 95% of individual taxpayers qualify, making it a comprehensive solution for most individuals.

The Simple IA is a step forward in making compliance easier for taxpayers while avoiding some of the constraints of its predecessor, the Streamlined Installment Agreement (SLIA).

A comparison: Simple IA vs. SLIA

Here’s how the new Simple IA stacks up against the now-retired SLIA for individuals:

Feature	Simple IA	SLIA
Assessed balance limit	Up to $50,000 (assessed balance)	Up to $50,000 (assessed balance)
Payment duration	Up to 120 months or CSED	Up to 72 months or CSED
Direct debit requirement	Not required to avoid a tax lien	Required for balances $25,000-$50,000
Lien avoidance	Possible without direct debit	Dependent on payment menthod if balance owed is between $25,000-$50,000

It should be noted that business SLIA agreements remain in effect, with specific rules for payroll and income tax balances. Payroll taxes owed up to $25,000 can be paid within 24 months using the In-Business Trust Fund Express Agreement, and businesses (Form 1120 and 1065 filers) can still pay up to $50,000 owed within 72 months or the CSED, whichever is earlier.

Example: how the Simple IA works

Consider this situation:

• Taxpayer profile: owes back taxes for 2022
  • Owes $51,900 in total (including penalties and interest)
    • Original assessed balance of $48,000
    • Accrued penalties and interest of $3,900
• Months to CSED: 100 months remaining
• Taxpayer status: in compliance; all back returns are filed
• Tax lien filing: no tax lien filed yet

Solution:

• Payment plan option selected: The taxpayer enters into a Simple IA by contacting the IRS or using the IRS Online Payment Agreement tool.
• Payment amount: The IRS calculates a minimum monthly payment of $590. Note that IRS algorithms are being updated to calculate the minimum payment. The IRS’s Online Payment Agreement application and an IRS representative will provide the minimum payment amount.
• Reduced penalties: The taxpayer benefits from a reduced failure-to-file penalty rate of 0.25% per month because they entered into a payment plan before they reached IRS Collection and filed their return on time.
• Select payment method: Payment methods include direct debit, online payment or check. Online setup with direct debit offers the lowest setup fee ($22).

This “simple” process helps taxpayers manage their obligations while improving payment terms.

Key takeaways for tax professionals

The IRS continues to change taxpayer collection alternatives to make it easier to resolve back tax issues. Tax professionals should consider the Simple IA a vital tool for assisting clients who owe taxes but cannot pay in full. Its longer payment terms, improved accessibility and flexibility make it a more taxpayer-friendly option than the previous SLIA.

With proper guidance, taxpayers can resolve their balances efficiently and avoid the complications of a tax lien filing.

Stay informed and help your clients navigate these changes to achieve compliance with less stress and greater convenience.