IRS installment agreements for small businesses: the 2026 rules

As of late April 2026, the federal payment plan rules that Oklahoma business owners encounter are not the ones most of them remember. The IRS retired its long-standing streamlined and in-business trust fund express categories in December 2025 and folded them into something it calls a Simple Payment Plan. The thresholds moved, the fixed 24-month business term disappeared, and the paperwork the IRS asks for at the front end got lighter. What didn't change is the part that gets owners into trouble: what an IRS installment agreement for a small business requires you to keep doing after it's signed.

This is how we think about the decision, in the order we'd want a CPA or owner to think about it.

Step one: figure out which taxpayer owes the money

The IRS runs two ledgers. Individuals, including sole proprietors and single-member LLC owners reporting on Schedule C, sit on one. Corporations, partnerships, and any entity with its own employment tax account sit on the other, which the IRS calls the business master file. The same dollar figure lands on different rules depending on which ledger it's on.

For an individual, the IRS states that a Simple Payment Plan is generally available when the assessed total of tax, penalties, and interest is $50,000 or less. For a business, the IRS splits the question by whether the balance includes trust fund taxes, meaning the income tax and employee share of payroll taxes withheld from workers' paychecks. A business without trust fund taxes qualifies at $50,000 or less. A business with trust fund taxes qualifies at $25,000 or less, with one exception: an out-of-business sole proprietorship is allowed up to $50,000 even with trust fund taxes.

The reason the trust fund threshold is half the other one is that trust fund money was never the business's money. Under IRC §6672, the responsible persons who willfully fail to pay it over can be assessed personally for the trust fund portion. That personal exposure is the shadow behind every business payment plan conversation, and it's the reason the IRS handles those balances differently.

Step two: understand what "simple" actually removes

According to the IRS, Simple Payment Plans are long-term plans that don't require a collection information statement, a lien determination, or a trust fund recovery penalty determination. Each of those omissions is a concrete benefit:

• No collection information statement means no Form 433-B financial disclosure listing the company's receivables, equipment, and bank accounts.
• No lien determination means the IRS doesn't run its usual analysis of whether to file a notice of federal tax lien as a condition of the agreement.
• No trust fund recovery penalty determination means the IRS doesn't, at that point, work up which owners and officers are personally responsible for the withheld payroll taxes.

The interim guidance the IRS issued to its collection staff, effective December 3, 2025, spells out the mechanics. For a business trust fund plan of $25,000 or less, the guidance says no trust fund recovery penalty determination is required before the assessment statute expires, no lien determination is required, no direct debit is required, and the plan's term is simply full payment by the collection statute expiration date. The old requirement to finish paying in 24 months, which defined the in-business trust fund express agreement, is gone from the criteria. The same guidance replaces the prior streamlined agreement, which had carried a 72-month term for balances up to $50,000.

Two exceptions in that guidance are worth knowing. Simple Payment Plan treatment doesn't apply when the request is made together with a request to release a levy, and it doesn't apply when the IRS concludes the request is being made solely to delay collection. An owner who waits until the bank account is levied to ask for a plan has, by the IRS's own criteria, lost access to the easy version.

The practitioner's edge on timing

The concession on the trust fund penalty determination is written for taxpayers who come forward early, and the older in-business trust fund express rules reflected the same logic. A payroll tax balance that sits in a revenue officer's inventory for months while the owner "gets the books together" is a balance that can get a trust fund penalty workup regardless of size, because the guidance leaves the revenue officer free to pursue one whenever the plan request looks like a delay tactic.

Step three: price the plan honestly

Interest and penalty don't stop because a plan exists. The IRS's payment plan page states that penalties and interest continue to be added until the balance is paid in full.

Interest

For the quarter beginning April 1, 2026, the IRS's published underpayment rate is 6%, computed as the federal short-term rate plus three percentage points. The rate resets quarterly, and a business plan that runs several years will see it move.

The failure-to-pay penalty

The penalty is 0.5% of the unpaid tax for each month or part of a month it stays unpaid, capped at 25%. For an individual who filed on time and has an approved payment plan, the IRS reduces the rate to 0.25% per month during the plan. The IRS describes that reduction for individuals; a corporation on a plan shouldn't assume it applies. In the other direction, if tax isn't paid within 10 days after a notice of intent to levy, the rate rises to 1% per month. So the same balance can carry a 0.25%, 0.5%, or 1% monthly penalty depending entirely on the taxpayer's posture at the time.

User fees

A plan set up by phone, mail, or in person costs $107 with direct debit and $178 otherwise, according to the IRS's Form 433-D and its payment plan page. Individuals at or below 250% of the federal poverty guidelines pay a reduced $43 fee, which the IRS waives for direct debit agreements and may reimburse on completion for taxpayers who can't pay electronically. That low-income reduction is defined by an individual's adjusted gross income, so it doesn't reach a corporation or partnership. Reinstating a defaulted agreement costs $89, or $43 for a low-income individual. The IRS charges lower fees for plans set up online, but its online application is built around individual accounts; the IRS directs business taxpayers to set up plans by phone using the number on their notice.

Step four: know the compliance rules before you sign

An installment agreement is a promise about the future, not just the past. The IRS's business installment agreement manual says that before approving a business plan, the IRS verifies the taxpayer's filing and deposit compliance and, for corporations and partnerships, checks the individual compliance of officers, partners, and LLC members. The business must show it can pay current operating expenses along with current and delinquent taxes. After approval the plan goes to centralized monitoring, which the manual says reviews monthly to confirm the business files returns when due and pays new liabilities when due.

That monthly monitoring is the point most owners miss. A federal payroll deposit that's late by one cycle, or a quarterly return filed a week after its due date, is a plan violation even if every installment payment was made on time. The plan protects the old balance only as long as no new balance forms behind it.

Default, in sequence

The statute lists what allows the IRS to alter or terminate an agreement: inaccurate or incomplete information, a significant change in financial condition, failure to pay an installment, failure to pay another tax liability when due, or failure to provide an updated financial statement on request. The IRS must give 30 days' notice before terminating, unless it believes collection is in jeopardy.

In practice the notice arrives as a CP523. The IRS's default manual says the taxpayer is given 30 days to comply with the agreement's terms before termination, and, separately, that no levies may be issued on the periods in the agreement for 90 days after the notice is mailed. That 90-day figure combines the 30-day cure period with a 60-day appeal window after termination. An owner who receives a CP523 has time to fix the missed deposit and keep the plan, or to appeal through the collection appeals program, but only if someone opens the envelope.

The manual also allows a defaulted agreement to be reinstated without a fresh financial review in narrow cases: when the default came from an additional liability that would add no more than two monthly payments, or when the account still meets the simplified criteria and hasn't defaulted in the preceding 12 months. Everything outside those cases starts the analysis over, and the reinstatement fee applies.

Step five: decide whether simple is actually right

Simple Payment Plans are the path of least paperwork, and for most Oklahoma businesses under the thresholds they're the right first move. There are honest reasons to think harder.

Consider the company that qualifies at $24,000 of payroll tax but is generating new payroll tax every two weeks it can't fully deposit. A plan on the old balance will default within a quarter, and each default makes the next agreement harder. The better conversation is about why the deposits are short, which is a cash-flow and structure question before it's a tax question.

Take the company at $60,000. It's over both business thresholds, which means a full financial statement, a lien determination, and, if trust fund taxes are involved, a trust fund penalty interview for the owners. A partial payment to bring the balance under the line before requesting the plan can change which process applies. That's a legitimate move and the IRS's own criteria invite it, but it's worth doing with a clear view of what the payment leaves behind for operations.

Then there's the owner who is treating the federal plan as the whole solution. It isn't. The Oklahoma Tax Commission runs its own payment plan process through its OkTAP portal, and its business tax penalty structure, a 10% penalty plus interest at 1.25% per month from the due date, is independent of anything the IRS agrees to. A federal installment agreement doesn't pause an Oklahoma tax warrant, and a state permit hearing doesn't wait for a federal plan to be approved. Both agencies are process-driven, and each process runs on its own clock.

What a lawyer adds, and when

A CPA can set up a Simple Payment Plan for a client in an afternoon, and often should. The point where we'd want a lawyer in the room is earlier than owners expect: when the balance includes trust fund taxes and more than one person signed checks; when a revenue officer has already asked for a financial statement or scheduled an interview; when the business is deciding whether to pay down to a threshold; or when a CP523 has arrived and the 30 days are running. Those are the moments where what gets said to the IRS shapes personal exposure under §6672, and where communications with a lawyer carry a privilege that an accountant's ordinarily don't.

If your company is carrying a federal balance it can't clear at once, or a payroll tax problem has started to compound, a conversation with our Oklahoma City office or through our contact page before the first request goes to the IRS will usually cost less than reworking a plan that was set up on the wrong ledger. The rules reward businesses that come forward early with a plan they can keep.

This article is general information about Oklahoma, Texas, and federal law, not legal advice, and it does not create an attorney-client relationship. Facts matter; talk to a lawyer about yours.