Criteria for calculating an Installment Agreement

There are restrictions on the amount one can pay on an Installment Agreement.  In other words, you cannot just pick an amount “out of the air” and require the IRS to accept it.  Different rules apply depending on the amount of delinquent taxes you owe.

 

 

If you owe less than $25,000.00, the IRS will accept your Installment Agreement request only if the following conditions are met: 1) the total owed is less than $25,000.00; 2) the taxpayer has filed all required returns for the past five years; 3) the taxpayer has not entered into another Installment Agreement within the past five years; 4) the IRS agrees that the taxpayer cannot pay the amount due in full immediately; 5) the Installment Agreement must provide for the debt to be paid off within five years; and 6)  the taxpayer complies with all applicable income tax provisions while the Installment Agreement is in effect.  If all of these conditions are met, the IRS will generally accept whatever amount you propose to pay per month (remembering that the amount chosen times 60 months must pay off the debt).  Of course, the higher your monthly payment the sooner you can pay the debt in full and the less interest you will pay.

 

If you owe more than $25,000.00 you must submit a complete financial statement showing your ability to pay.  In this case, the amount is calculated from your financial data and you can take longer than 5 years to pay.  Sometimes the debt is never paid in full when the statute of limitations for collection expires.