The IRS recently changed its rules regarding monthly Installment Agreements, making it easier for individual taxpayers to get into one. Now, taxpayers with unpaid balance of assessments (total balance not including accruing but unassessed penalties and interest) less than $250,000 can pay their balance over 72 months (or the remaining time on the collection statute, whichever is less), without having to provide any financial information.
Previously, the IRS only allowed taxpayers with unpaid balance of assessments below $100,000 to qualify for an Installment Agreement, without having to provide financial information. At that time, the IRS offered payments for up 84 months, but that has since changed. If a taxpayer previously had unpaid balance of assessments over $100,000, but had the ability to pay within 72 months (or less), the IRS still required financial information to prove the ability to make the monthly payments. If the taxpayer showed the ability to pay more each month than the minimum amount required to pay the full balance due (plus accruing penalties and interest) within 72 months, the IRS could require a higher payment.
With the increase from $100,000 to $250,000, more taxpayers will be eligible to get into an Installment Agreement, without having to argue with the IRS over what the monthly amount should be. The IRS will simply calculate the minimum monthly payment required to fully pay the balance due, including tax, penalties and interest, in 72 months. If a taxpayer has a balance of less than $250,000, but cannot pay the balance due within 72 months, then financial information is required to show what the taxpayer’s monthly ability to pay is.
There are several benefits to not having to provide financial information to the IRS if you have the ability to full pay your balance within 72 months (and you owe less than $250,000). First, the IRS cannot make you pay more than the minimum required to pay in 72 months, even if your financial information supports a higher monthly payment. You don’t have to discuss your finances with the IRS at all if you can agree to pay the minimum required to fully pay in 72 months. Second, you do not have to spend the time preparing a full financial disclosure. Third, a financial disclosure gives the IRS a roadmap to collect from you through enforced collection action in the event you default your Installment Agreement.
For many taxpayers, agreeing to pay in 72 months in the simplest way of managing their outstanding tax liabilities with the IRS. Of course, if a taxpayer does not have the ability to make payments, the taxpayer can still request from the IRS that their account placed in Currently Not Collectible status, or compromise the liabilities through an Offer in Compromise (Doubt as to Collectibility).