Personal Installment Agreement and Partial Penalty Relief for a California Couple

A married couple in California spent five years watching their federal income tax debt grow before they finally reached out for help. By the time they came to PFGTAX, the IRS had them down for more than eighty six thousand dollars across five tax years, and a levy was hanging over their heads. PFGTAX negotiated a direct debit installment agreement that let them keep working and paying down the debt on their own terms, then went back and got a chunk of the penalties removed on top of it.

How it started

The couple’s tax trouble built up slowly, the way it usually does. A few lean years, a return filed late here and there, an underpayment that never quite got caught up. By the time the IRS finished totaling the damage, the couple owed money on five straight years of Form 1040 individual income tax, from 2011 through 2015. The balances ranged from a few dollars in the smallest year to over thirty thousand dollars in the worst one. Add it all up and the total came to $86,763.94.

Once a balance like that sits for a few years, penalties and interest do a lot of the growing. The IRS charges a failure to pay penalty and a failure to file penalty separately, and both keep compounding until the balance is dealt with. That is exactly what had happened here. A debt that started as unpaid tax had ballooned into something much bigger, made up largely of add on charges rather than the original amount owed.

The pressure from the IRS

Once a personal tax debt reaches this size, the IRS does not just send letters and wait. Collection can escalate to a bank levy or a wage garnishment, and the couple had already been in contact with the IRS about the status of a levy hold on their account. That is the kind of notice that makes people stop sleeping. A levy means the IRS can reach directly into a bank account or a paycheck without going to court first, and once that happens it is far harder to negotiate calmly. The couple needed a resolution in place before that pressure turned into action.

What we did

PFGTAX stepped in to represent the couple directly with the IRS, so they were no longer fielding collection calls or letters on their own. The first move was pulling their account transcripts to confirm exactly what was owed, year by year, rather than relying on guesswork. With clear numbers in hand, PFGTAX negotiated a direct debit installment agreement, meaning the payment comes out of the couple’s bank account automatically every month instead of relying on a mailed check that could be late or lost.

The agreement set payments at $1,033 a month for 72 months, enough to satisfy the full balance over six years without the couple having to liquidate savings or sell anything to pay it off in one shot. A direct debit agreement also carries a lower setup fee than a standard mailed-payment plan, and it is generally viewed favorably by the IRS because the risk of a missed payment drops sharply.

PFGTAX did not stop at the installment agreement. With the debt payment plan in place, we turned to the penalties that made up such a large share of the balance and requested a penalty abatement, the IRS process for asking that some or all penalties be removed for reasonable cause. That first request got $3,695.63 in penalties abated, and PFGTAX followed up with another abatement request once the installment agreement was confirmed, aiming to bring the total down further.

The outcome

The couple ended up with one predictable monthly payment instead of a mounting balance and the threat of a levy. The direct debit installment agreement put the IRS’s collection machine on pause, since the government generally will not levy a taxpayer’s assets while a payment agreement is active and current. On top of that, thousands of dollars in penalties came off the balance, which meant more of every future payment went toward the actual tax owed rather than add on charges.

Why it matters

A five figure tax debt that has been building for years feels impossible to untangle on your own, especially once a levy enters the conversation. This case shows what a methodical approach looks like: get the real numbers from the IRS instead of guessing, put a sustainable payment plan in place before a bank account gets touched, and then go back for penalty relief once the immediate danger has passed. None of this happened overnight. It took a liability review, a formal agreement, and a separate penalty abatement request handled as its own project. That is usually what it takes when a debt has had years to grow.

Facing a levy or a growing IRS balance? Call PFGTAX at 888.572.2179 to talk through a payment plan that actually fits your budget.

Frequently asked questions

What is a direct debit installment agreement, and how is it different from a regular payment plan?

A direct debit installment agreement lets the IRS pull your monthly payment straight from your bank account instead of you mailing a check every month. Under IRC 6159 and IRM 5.14, the IRS generally charges a lower setup fee for direct debit plans and treats them as a more reliable form of agreement, since there is less risk of a missed or late payment. It also means one less thing to remember every month once the agreement is set up.

Can the IRS still levy my bank account once I have an installment agreement?

Generally no, as long as the agreement stays in place and you keep making payments on time and stay current on new tax filings. Under IRM 5.14, an active, in-force installment agreement pauses most collection activity, including levies. If a payment is missed or a new balance builds up, the agreement can default and collection can start again, so staying current matters just as much as getting the agreement approved.

What is penalty abatement, and who qualifies?

Penalty abatement is a request asking the IRS to remove some or all of the penalties added to a tax debt, separate from the actual tax owed. Under IRM 20.1.1, the IRS can grant relief when a taxpayer shows reasonable cause, meaning specific circumstances beyond their control kept them from filing or paying on time. It requires a written explanation with real dates and facts, not just a general request.

Does penalty abatement reduce the tax I owe, or just the extra charges?

It only reduces penalties, not the original tax debt or any interest that has already accrued on it. That said, penalties can make up a significant share of an old balance, so successfully abating even part of them can meaningfully shrink what is left to pay off, as it did here.

How long does an installment agreement like this typically last?

It depends on the balance and the monthly payment amount the IRS agrees to, but under IRM 5.14 most agreements are structured to pay off the full balance before the IRS’s ten year collection window closes. A 72 month plan is a common structure for a mid five figure to low six figure balance, since it is long enough to be affordable but still resolves the debt well within that window.

Results depend on each taxpayer’s specific facts and financial situation. PFGTAX does not guarantee any particular outcome or reduction in tax debt.

Facing a levy or a growing IRS balance? Call PFGTAX at 888.572.2179 to talk through a payment plan that actually fits your budget.