Payment plan terms
- Payment plan: the IRS's everyday name for an installment agreement, an arrangement to pay a balance over time. See payment plan types and fees.
- Short-term payment plan: extra time of 180 days or less to pay in full, available below $100,000 in combined tax, penalties and interest. It has no setup fee.
- Long-term payment plan: a monthly installment agreement. It carries a setup fee of $29 to $178 as of October 2026, depending on how you apply and pay.
- Simple Payment Plan: the long-term plan that needs no financial statement, for individuals who owe $50,000 or less. It replaced the streamlined installment agreement in July 2026. See the Simple Payment Plan guide.
- Streamlined installment agreement: the former name of the Simple Payment Plan. Its two-tier balance structure, time limit and direct debit requirement were removed in 2026.
- Guaranteed installment agreement: a plan the IRS must accept by law when an individual owes $10,000 or less in income tax, not counting penalties and interest, has filed and paid for the previous five years and will pay within three years.
- Direct debit installment agreement (DDIA): a plan paid by automatic monthly withdrawal from a checking account. It has the lowest setup fee and is the route to lien withdrawal.
- Partial pay installment agreement: a plan with payments too small to clear the balance before the collection period ends. It requires a financial statement. See the partial pay guide.
- Online payment agreement (OPA): the IRS.gov application individuals use to set up a plan and get an immediate answer.
- User fee: the one-time setup charge for a long-term payment plan. It is waived or reduced for low-income taxpayers.
- Default: what happens when a plan's terms are broken by a missed payment, an unfiled return or a new unpaid balance. The IRS sends Notice CP523 before ending the agreement.
Lien and levy terms
- Federal tax lien: the government's legal claim against all your property, which arises once tax is assessed, billed and left unpaid. See the federal tax lien.
- Notice of Federal Tax Lien (NFTL): the public document the IRS files to alert other creditors to its claim. The IRS manual sets the general filing guideline at $10,000 or more in unpaid assessments.
- Lien release: the end of the lien. The IRS releases it within 30 days after the balance is paid in full.
- Lien withdrawal: removal of the public notice, as though it had not been filed. You still owe the balance. It is requested on Form 12277. See Fresh Start lien withdrawal.
- Discharge: removal of the lien from one specific property, usually so it can be sold.
- Subordination: the IRS letting another creditor move ahead of it, usually so a loan or refinance can close. The lien stays in place.
- Levy: the actual taking of property, such as money in a bank account or part of your pay. A lien is a claim; a levy is a seizure.
- Wage garnishment: the everyday name for a continuous levy on wages. See IRS wage garnishment.
- Final notice of intent to levy: the letter that starts the last 30-day window before the IRS can levy, and that carries the right to a hearing.
Offer and hardship terms
- Offer in compromise (OIC): an agreement to settle a tax balance for less than the full amount. See what Fresh Start changed for offers.
- Reasonable collection potential (RCP): the amount the IRS calculates it could collect from your assets and future income. An offer generally has to equal or exceed it.
- Doubt as to collectibility: the usual ground for an offer, meaning the IRS is unlikely to collect the full balance before the collection period ends.
- Doubt as to liability: a different kind of offer, made when there is a real dispute about whether the tax is owed at all.
- Effective tax administration: a rarely used ground for an offer where the tax could be collected but doing so would cause economic hardship or be unfair.
- Lump sum offer: an offer paid in five or fewer payments within five months of acceptance. It requires 20% of the offer with the application.
- Periodic payment offer: an offer paid in monthly installments over 6 to 24 months, with payments continuing while the IRS reviews it.
- Low-income certification: the test on Form 656 that waives the $205 application fee and the offer payments during review for individuals who meet it.
- Collection Financial Standards: the national and local allowances the IRS uses for living expenses when it measures ability to pay.
- Currently not collectible (CNC): a status in which the IRS pauses collection because paying would cause hardship. The balance stays, and penalties and interest keep accruing. See the IRS hardship program.
Penalty and interest terms
- Failure-to-file penalty: 5% of the unpaid tax for each month or part of a month a return is late, up to 25%.
- Failure-to-pay penalty: 0.5% of the unpaid tax for each month or part of a month it stays unpaid, up to 25%. It drops to 0.25% during an approved payment plan for individuals who filed by the due date.
- Failure-to-deposit penalty: a penalty on employment taxes that were not deposited in the right amount, at the right time or in the right way.
- First Time Abate (FTA): an administrative waiver of certain penalties for taxpayers with three prior years of timely filing and payment. It has to be requested, and it is being phased out.
- Automatic Exemption from Penalty (AEP): the replacement for First Time Abate, applied by the IRS without a request to 2025 returns and later. See the AEP guide.
- Reasonable cause: relief from a penalty because you used ordinary care and were still unable to comply, for example after a serious illness or a disaster.
- Abatement: the removal or reduction of a penalty, interest or tax that has already been charged.
- Underpayment interest: the charge on unpaid tax and penalties, set at the federal short-term rate plus 3 percentage points and compounded daily. See penalties and interest on back taxes.
Clock and record terms
- Assessment: the date the IRS formally records a tax as owed. Most collection deadlines run from it.
- Collection statute expiration date (CSED): the end of the period, generally 10 years from assessment, in which the IRS can collect. See the collection statute.
- Account transcript: the IRS's line-by-line record of a tax year, showing assessments, payments, penalties and notices. See IRS transcripts explained.
- Substitute for return: a return the IRS prepares for you when you have not filed, usually with no deductions and a higher balance than a real return would show.
- Compliance: being current on every required return and on this year's withholding or estimated payments. Every Fresh Start option requires it.
- Seriously delinquent tax debt: a legally enforceable balance above $66,000 for 2026, which the IRS can certify to the State Department for passport action.
People and paperwork
- Collection information statement: the financial disclosure on Form 433-F, 433-A or 433-B, listing income, expenses and assets. See Form 433.
- Form 9465: the paper request for an installment agreement, used when you cannot or do not apply online.
- Form 656: the offer in compromise application, filed with Form 433-A (OIC) or 433-B (OIC).
- Form 843: the form used to claim a refund or request abatement of certain penalties, interest and fees.
- Form 2848: the power of attorney that authorizes an attorney, certified public accountant or enrolled agent to act for you with the IRS. Form 8821 only lets someone see your tax information.
- Revenue officer: an IRS collection employee assigned to a case in person, usually for larger or business balances.
- Trust fund taxes: taxes a business withholds from employees and holds for the government, such as withheld income tax and the employee share of Social Security and Medicare.
- Trust fund recovery penalty: a penalty that makes responsible individuals personally liable for unpaid trust fund taxes.
- Taxpayer Advocate Service (TAS): an independent organization inside the IRS that helps when the normal process is stuck or causing hardship. Its help is free.
- Low Income Taxpayer Clinic (LITC): an independent clinic that helps low-income taxpayers in disputes with the IRS for free or a small fee.
Where we come in
Knowing the terms is half of it. The other half is knowing which ones apply to your account. We read the transcripts for every open year, prepare unfiled returns, work out the collection date for each assessment and explain in writing which options your numbers support. We give you a scope and a price in writing before anything starts. Start with the Fresh Start guide or the tax resolution page.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on October 1, 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
