An Installment Agreement gives the taxpayer an opportunity to pay their tax debt within manageable increments. It is usually set up over a period of time with fixed monthly increments. The formula used to calculate your payments is based on your outstanding tax liability. The amounts you pay are also based on your ability to pay.
However, while an Installment Agreement may be ideal to pay your outstanding tax liability, it can be a more costly form of clearing your tax debt because of the fees and interest payments associated with setting up a credit payment. In addition, the IRS may charge interest and penalties on the unpaid portion of the debt.