Installment Agreements Generally.
Taxpayers do not always have the financial wherewithal to pay all of their federal tax obligations on time. In these instances, the Internal Revenue Code (the “Code”)[i] grants taxpayers with a statutory right to request additional time to make full or partial payment through an installment agreement.[ii] If the IRS accepts the terms of the installment agreement, the taxpayer benefits in that the IRS is precluded from levying against the taxpayer’s assets, provided the taxpayer continues to comply with the terms of the agreement.[iii] Moreover, the IRS benefits in that it is not required to devote its resources to investigate the taxpayer’s financial situation and also seek levy of the taxpayer’s assets to satisfy the outstanding tax debts.
IRS Form 433-D.[iv]
Generally, a taxpayer enters into an installment agreement with the IRS through execution of an IRS Form 433-D, Installment Agreement. A standard-form Form 433-D provides the following terms and agreements amongst the parties:
- The amount of the monthly payment to the IRS;
- Whether the monthly payment will remain static or increase/decrease after a specified period of time;
- Recognition by the taxpayer that the agreement is based on the taxpayer’s current financial condition and that the agreement may be modified or terminated if the IRS has information that suggests that the taxpayer’s ability to pay has “significantly changed”;
- Recognition by the taxpayer that the taxpayer must remain compliant with other federal tax reporting and payment obligations while the agreement remains in effect;
- Recognition that the IRS may terminate the installment agreement in certain instances, including: (1) if the IRS has information that suggests that the taxpayer’s ability to pay has “significantly changed;” (2) the taxpayer has failed to stay compliant with all federal tax reporting and payment obligations; (3) the taxpayer misses a monthly payment; and (4) the taxpayer fails to provide requested financial information to the IRS.