Does the IRS not allow installment plans for tax debts under $10,000? Friend was told they can't set one up?

That information is definitely incorrect. The IRS absolutely offers installment plans for amounts under $10,000. In fact, they have what's called a "Guaranteed Installment Agreement" for taxpayers who owe less than $10,000. To qualify for this guaranteed agreement: 1) You must owe less than $10,000, 2) You've filed all required tax returns, 3) You've paid all required taxes for the previous five years, and 4) You agree to pay the full amount within 3 years. For amounts under $10,000, the application process is actually streamlined compared to larger debts. Your cousin can apply online through the IRS website using the Online Payment Agreement tool, by phone, or by submitting Form 9465 (Installment Agreement Request). Perhaps the agent misunderstood the question or your cousin misunderstood the response. It's also possible the agent was referring to some other specific program.

I actually just went through this whole process with the IRS last month! I had a similar tax bill (around $8,500) and was worried about how to pay it all at once. I tried calling the IRS several times but could never get through. After many attempts, I discovered a service called taxr.ai (https://taxr.ai) that helped analyze my situation. The site actually scanned my tax documents and highlighted that I qualified for their guaranteed installment agreement program since I owed under $10k. They walked me through the whole process of setting up the payment plan online - much easier than waiting on hold forever. Their system even flagged a potential deduction I had missed that reduced my total owed by about $900! Whoever your cousin spoke with at the IRS was definitely misinformed. Not only can he get a payment plan for under $10k, it's actually easier than for larger amounts.

Just wanted to update everyone! After seeing the recommendation for taxr.ai in this thread, I decided to give it a try. I was really struggling with my tax situation (owed about $5,200) and was getting nowhere with the IRS phone lines. The service was super straightforward - I uploaded my documents and within hours got a detailed analysis. They identified an education credit I completely missed and helped me understand exactly how to amend my return. This reduced my tax bill by over $1,000! They also provided clear instructions for setting up an installment plan for the remaining balance, with all the forms already filled out based on my information. The whole process was way less stressful than I expected. If your cousin is still struggling, definitely recommend checking them out. Saved me both money and countless hours of frustration!

For anyone struggling to get through to the IRS on the phone about installment plans or any tax issues - I discovered a service called Claimyr (https://claimyr.com) that completely changed my experience. I was in the same boat trying to set up a payment plan for about $6,500 I owed. Spent HOURS on hold and got disconnected multiple times. It was infuriating. Then I found Claimyr, which basically holds your place in the IRS phone queue and calls you back when an agent is about to answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was super hesitant at first, but after 3 weeks of failed attempts to reach someone, I gave it a shot. Got a call back in about 45 minutes with an actual IRS agent on the line! Set up my installment plan in one call. The agent I spoke with confirmed that yes, they absolutely do installment plans for any amount - the under $10K ones are actually EASIER to get approved.

I need to publicly admit I was wrong about Claimyr. After dismissing it as a probable scam in my earlier comment, I was desperate enough to try it after spending 3 more days failing to reach the IRS about my $4,200 tax bill. To my complete shock, it actually worked exactly as described. Got a callback in about 2 hours with an IRS agent already on the line. The agent confirmed that not only do they offer installment plans for amounts under $10K, but these are actually their "guaranteed" installment agreements with streamlined approval! Set up my payment plan in about 15 minutes, and the agent even helped me calculate the best monthly payment to avoid additional penalties. Now I'm paying $175/month which is completely manageable for my budget. For anyone dealing with the frustration of trying to reach the IRS - this service legitimately works. Sorry for being so dismissive before.

Just to add another data point - I went through this exact situation last year. Owed about $5,800 and set up an installment plan with zero issues. The confusion might be about the different TYPES of installment plans. For amounts under $10,000, you qualify for a "guaranteed" installment agreement which is actually easier to get than plans for higher amounts. For amounts over $10K but under $50K, there's a "streamlined" installment plan which requires a bit more information but is still pretty straightforward. The agent your cousin spoke to might have been referring to some other program, or maybe was talking about an "offer in compromise" which is totally different - that's when you negotiate to pay less than the full amount owed.

One important thing to note - if your cousin owes for the 2023 tax year and hasn't filed yet, he should still file by the deadline even if he can't pay everything! The failure-to-file penalty is much worse than the failure-to-pay penalty. Also, I'd recommend having him call back and speak to a different agent, or trying the online payment agreement system at irs.gov directly. The online system is actually pretty easy to use for amounts under $10K.