IRS Sets National Guidelines for Installment Agreements

Article excerpt

For the first time in history, the Internal Revenue Service is getting ready to impose a set of national standards to evaluate installment agreements _ deals where delinquent taxpayers agree to pay what they owe over time.

In the past, installment agreements were negotiated one-on-one _ revenue agent to taxpayer _ and were highly subjective. In some cases, taxpayers came out with favorable deals; in others, they were left with little more than their socks, tax accountants say.

However, in the fall, the agency will issue a new set of national guidelines that delineates just how much taxpayers can spend for specific items _ such as food, clothing, utilities, transportation and housing _ when they're paying tax bills in monthly installments.

Those willing and able to fall into the IRS budget are likely to find their installment agreement requests granted. Those who aren't are likely to be turned down _ unless they can persuade revenue agents that there are compelling extenuating circumstances that warrant bending the rules.

Some say the proposed national guidelines are a signal that the kinder, gentler image the IRS has been promoting over the past several years is a thing of the past. The IRS is throwing away the carrot and going for the stick, says Peter Berkery, manager of Research Institute of America's Washington bureau.

The IRS counters that this is no departure. The national standards are not necessarily stricter than before _ they're just being made uniform office to office, district to district, deal to deal. Standard rules are necessary to eliminate inconsistent treatment of taxpayers, said Steve Taylor, assistant director of collections at the IRS in Washington, D.C.

"We are making these changes to bring more consistency and fairness _ and to make this a more predictable process," Taylor said. "There is no goal to be more harsh, and I don't think that's going to be the across-the-board result."

In some significant ways, the national rules are merely a formalized version of what's already considered accepted practice. They'll spell out that the IRS only accepts installment agreements under three basic circumstances: When back tax bills amount to $10,000 or less. When back tax bills can be paid off within three years. When the taxpayer has no valuable assets or borrowing power that would enable him or her to pay off the bill in any other way.

It will also clarify that the IRS gives taxpayers in the first two categories fairly wide berth in negotiating a deal to pay over time. If you owe a relatively small amount and can pay it off in monthly installments within, say, a year or two, there's a fairly good chance that the IRS won't even ask for a financial statement before approving your proposal. …