A program like this is typically for delinquent taxpayers and businesses that cannot settle their entire tax debt all at once and need to make payments. Typically the installment agreement is 60 months or less although the IRS is allowed to collect over 10 years. Installment Agreements are employed when the taxpayer has the ability to pay back tax as evidenced by his or her financial profile when using IRS Collection Standards. Those Standards are averages of expenses that individuals living in various parts of the nation are likely to incur. Standards are set for food and clothing, housing and utilities, transportation costs and health care (allowances for health care are set, not on standards, but on actual experience of each individual, plus court ordered or legally mandated payments such as family support, student loans and judgments. The allowances indicated in the Standards are added together and then subtracted from monthly after tax income. Any excess of after tax income over the allowance is referred to by the IRS as ‘ability to pay’ and is the amount the IRS will demand each month in an Offer in Compromise or Installment Agreement If 60 payments of the ‘ability to pay’ amount is less than the tax debt the IRS will consider an offer to pay the lesser amount. If the ‘ability to pay’ amount is greater than the tax liability, the IRS will demand their money in an Installment Agreement of not more than 5 years.
The Installment agreement provides the taxpayer valuable time to catch up on finances and escape the harassment and embarrassment of dealing with revenue officers and IRS agents. If the IRS has burdened you with an unreasonable payment plan or is threatening to levy or garnish your wages, bank accounts and other seize your assets, we may be able to arrange an Installment payment plan for you that conforms to your current financial situation or, if your financial condition warrants, we can have your account placed in a “not currently collectible” status. Under this program, the IRS withholds all collection activity until you are financially able to accept a payment plan or have an Offer in Compromise submitted.