Section 6159 of the Internal Revenue Code (Code) authorizes the IRS to enter into an agreement with any taxpayer for the payment of tax in installments. 26 CFR 301.6159-1. Before entering into an installment agreement, the IRS may examine the taxpayer’s financial position to determine whether such an agreement is appropriate. Once the agreement is in effect, the IRS must process the payments and monitor compliance. Section 6331(k)(2) of the Code generally prohibits the IRS from levying to collect taxes while a request to enter into an installment agreement is pending, and if rejected for 30 days thereafter, and, if a timely appeal of rejection is filed, for the duration of the appeal. Section 6331(k)(2) of the Code also generally prohibits the IRS from levying to collect taxes while an installment agreement is in effect. A taxpayer that enters into an installment agreement therefore receives a special benefit of being allowed to pay an outstanding tax obligation over time.
Under sections 300.1 and 300.2 of the Treasury Regulations, the IRS currently charges $105 for entering into an installment agreement, except that the fee is $52 for a direct debit installment agreement, which is an agreement whereby the taxpayer authorizes the IRS to request the monthly electronic transfer of funds from the taxpayer’s bank account to the IRS, and the fee is $43 if the taxpayer is a low-income taxpayer (notwithstanding the method of payment). Also, the IRS currently charges $45 for restructuring or reinstating an installment agreement that is in default. The amount of the fees has not changed since 2007.