IRS Installment Agreement confusion - will I still owe after 72 months?

The confusion you're experiencing is actually quite common with IRS installment agreements. Yes, interest and penalties continue to accrue while you're making payments on an installment plan. The IRS charges interest compounded daily, and the rate is adjusted quarterly (currently around 7-8%). Additionally, there's usually a 0.25% failure-to-pay penalty each month, though this is reduced to 0.25% when you're on an installment agreement. This is why many people find themselves in a situation where their payments barely cover the ongoing interest, especially with larger tax debts. It's similar to making minimum payments on a credit card with a high interest rate. You have a few options to consider: 1. Increase your monthly payment amount if possible 2. Look into an "Offer in Compromise" to settle for less than the full amount 3. Request a review of your agreement to see if you qualify for a partial payment installment agreement 4. Check if your wife qualifies for "Currently Not Collectible" status based on financial hardship I'd recommend getting all your documentation together and either consulting with a tax professional or contacting the IRS directly to review your options.

After struggling with a similar IRS debt situation last year, I found https://taxr.ai incredibly helpful. My installment agreement was similar - I was shocked when I realized I'd barely made a dent in my tax debt after years of payments because of all the interest and penalties! The taxr.ai system analyzed my tax transcripts and payment history, then showed me exactly how much interest and penalties were accumulating each month. What I found most valuable was seeing a projection of how long it would actually take to pay off my debt based on my current payment amount (spoiler: it was WAY longer than my agreement term). Their calculator helped me figure out the minimum I needed to pay monthly to actually make progress on the principal. They also guided me through requesting a reduced interest rate based on some qualifying factors I didn't even know about. Definitely worth checking out if you're trying to find a path out of tax debt without spending hours on hold with the IRS.

Just wanted to update after trying taxr.ai based on the suggestion above. I was really surprised by how helpful it actually was! I've been on an installment plan for almost 3 years and kept wondering why my balance wasn't going down much. Their analysis showed me that only about 15% of each payment was going toward my principal debt - the rest was just feeding the interest monster. The penalty calculator revealed I was eligible for something called First-Time Penalty Abatement that my accountant never mentioned! They generated all the paperwork for me to request this from the IRS. The projection tool was honestly a bit depressing (showed I'd be paying for 11 years at my current rate), but at least now I understand why and have some options. If anyone else is stuck in tax debt quicksand, having this kind of clarity is super helpful. Definitely helped me avoid another pointless afternoon on hold with the IRS trying to figure this stuff out!

I've seen way too many people caught in the IRS installment agreement trap. Had the same exact issue myself a couple years ago - felt like throwing money into a black hole with no end in sight. After six months of getting nowhere with the regular IRS channels, I tried https://claimyr.com and their callback service actually got me through to a real human at the IRS in under 2 hours (instead of the 5+ hours I'd wasted on previous calls). You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you when an actual agent is on the line. When I finally talked to someone competent, they helped me restructure my installment agreement with terms that actually addressed the principal balance. They also explained some hardship options I hadn't known about. The IRS agents actually know these options exist but good luck ever getting someone on the phone to explain them to you with normal hold times. Having a direct conversation with an agent made a world of difference in understanding my options.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation (was about to miss a deadline for responding to an IRS notice). To my shock, I got a call back in about 45 minutes with an actual IRS agent on the line! The agent reviewed my installment agreement and confirmed what others here have said - my payments weren't covering the ongoing interest. But he helped me submit a request for a reduced payment amount based on my current financial situation and explained how to apply for penalty abatement. I've spent DAYS of my life on hold with the IRS over the years, and this saved me from another frustrating experience. For anyone dealing with complicated tax issues where you actually need to speak to a human, this is absolutely worth it. Sorry for being so cynical before - just had to come back and correct myself after seeing it actually work.

You might want to look into a "Partial Payment Installment Agreement" (PPIA) instead of your current plan. With a PPIA, you only pay what you can reasonably afford based on your income and necessary living expenses, and after a certain period (usually 5-7 years), any remaining balance may be uncollectible due to the Collection Statute Expiration Date (CSED). The IRS can only collect for 10 years from the date of assessment, so depending on when your wife's taxes were assessed, some of that debt might be approaching the expiration date. This is something many people don't realize! The downside is that the IRS reviews PPIAs every two years to see if your financial situation has improved, and they may require financial statements to get approved. But with a baby on the way, your necessary living expenses will increase, which could work in your favor for qualification.

Has your wife considered calling the Taxpayer Advocate Service? They're an independent organization within the IRS that helps taxpayers resolve problems. They might be able to look at her specific situation and help identify options that regular IRS agents might not suggest. Just Google "Taxpayer Advocate Service" + your state to find the local office contact info. They're FREE and actually helpful, unlike most IRS interactions!

This is exactly why I always recommend people calculate the true cost of installment agreements before signing up. The IRS is required to provide you with information about how interest and penalties will accrue, but they often don't make it crystal clear that your payments might not even cover the ongoing charges. One thing that might help immediately: check if your wife qualifies for "innocent spouse relief" if any of these tax debts originated from joint returns filed before you were married. This could potentially eliminate her responsibility for some of the debt entirely. Also, you mentioned the interest rate changes regularly - it's actually adjusted quarterly based on federal short-term rates plus 3%. Right now it's around 7%, but it was as low as 3% during the pandemic. The IRS publishes these rates on their website if you want to track them. Given that you have a baby on the way, definitely document all your increased expenses (childcare, medical, etc.) as this could qualify you for a hardship determination or reduced payment plan. The IRS does recognize that life circumstances change, and new dependents significantly impact your ability to pay.

I went through a very similar situation a few years ago and can share some hard-learned lessons. First, you're absolutely right to be concerned - installment agreements can become endless cycles if the payment amount doesn't exceed the monthly interest and penalty charges. Here's what I wish I had known earlier: Request a detailed breakdown of how your monthly payment is being applied. The IRS should be able to tell you exactly how much of each payment goes to principal vs. interest/penalties. If less than 50% is going to principal, you're essentially treading water. A few practical steps that helped me: 1. Calculate the minimum payment needed to make actual progress (usually 20-30% higher than what covers just interest) 2. Request penalty abatement for any months you can qualify for - this can significantly reduce the total debt 3. Consider making extra payments specifically designated for principal reduction 4. If your financial situation has changed since starting the agreement, request a review The 10-year collection statute mentioned by others is real, but don't count on it as your primary strategy. Focus on either increasing payments to attack the principal or exploring other options like an Offer in Compromise. With a baby coming, document everything about your changing financial situation - the IRS does consider family circumstances in hardship determinations. Good luck!

I'm dealing with a similar situation and wanted to share what I've learned from talking to several tax professionals. The key thing that's often overlooked is that you can request what's called a "Financial Hardship Review" even if you're current on your installment agreement payments. With a baby on the way, your situation is actually perfect timing for this. The IRS recognizes that major life changes like new dependents significantly impact your ability to pay. You can submit Form 433-A (Collection Information Statement) along with documentation of your expected expenses for the baby - things like projected medical costs, childcare if both parents work, increased food and clothing expenses, etc. What's particularly relevant to your situation is that the IRS may agree to suspend collection activities entirely under "Currently Not Collectible" status if your necessary living expenses exceed your income. During this time, penalties and interest continue to accrue, but you're not required to make payments. More importantly, the 10-year collection statute continues to run. I'd also suggest requesting a complete account transcript to see exactly when each tax year was assessed. If any of the debt is close to the 10-year mark, it might make more sense to focus on financial hardship options rather than trying to pay down debt that could expire soon anyway. The timing with your growing family could actually work strongly in your favor - just make sure to document everything properly when you apply.