In an earlier video, I talked about the three different types of IRS installment plan available with the IRS.

In this page, we’re going to talk about what I call “a classic installment agreement.” It looks something like this.

The taxpayer owes in excess of $50,000 or they’ve had multiple installment agreements that have been defaulted on in the past. The IRS is tired of playing games.

What they do is they require is a financial statement with collection information statement of one of three types. There’s a 433F. It’s something of a streamlined form that the automated collection system, ACS, uses when they’re the function that’s actually working the case and try to collect the money from the taxpayer.

The other two collection information statements are the 433A, used for individuals and wage earners and the 433B, which is used for small business people and self‑employed people.

The result of those 433F, A, or B, is going to determine what the taxpayer actually pays in the IRS installment plan or rather, it’s going to determine what the IRS is going to look to for the minimum payment available on an installment of that particular taxpayer.

Let me give you an example. Let’s say the taxpayer owes $60,000 to make $8,000 a month and after they get done with their collection information statement it says that the IRS or the monthly disposable income, according to the IRS horrible standards is $3,200 a month.

I think that number $3,200 on a $60,000 liability is basically obscene but we see results like this all the time when we’re dealing with the IRS. How do they arrive at those numbers?

I alluded to it earlier. They use what they call “allowable expenses.” Here’s one example. They use a number called, “The National Standard,” which stands for food, clothing, and other miscellaneous expenditures.

I looked it up and for a family of four, that is number is $1,450 a month. It doesn’t matter what your income level is, you’re allowed up to $1,450 a month for The National Standard of expenses, food, clothing and miscellaneous. That could be really good or it could be really bad. It depends on where you live in this great big country of ours, the United States of America.

The classic IRS installment plan, in my opinion, are something to be avoided, if at all possible. There are oftentimes better collection alternatives than this classic installment agreement where the IRS is going to ask for this big whopping payment.

IRS installment plan

Sometimes if you have a tax professional help you perhaps plan your financial life better or help you put your expenses and your income on the collection information statement correctly then that can actually help you because it helps the IRS understand that you don’t have this big whopping sum available to pay them every month.