Dec 1, 2007

Installment Agreements - Alternatives

With the new IRS allowable living expenses standards hurting higher income taxpayers, have you considered two alternatives in setting up an installment agreement to pay your past due tax debt:

1. The five-year installment agreement - this agreement allows you to have an installment agreement without consideration of what expenses would be allowable as long as the tax is paid in full over 5 years- see the IRS Internal Revenue Manual.
2. The 12-month adjustment to your living standards allowance - this allows for you to adjust your lifestyle back to the IRS allowable living expense standards for 12 months and then the installment agreement reverts to the allowable standards. The IRS is reluctant to offer this but they must consider it if you request it (see the IRM).

Always remember, if your financial situation changes, you can renegotiate any installment agreement (this goes both ways - if the IRS reviews your file and it appears that you should be able to pay additional funds, then they may ask for new financial statements and documents from you). Hence, it is important to keep the data that you used to get your installment agreement.

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