If the balance owing to the IRS is less than $50,000, then the IRS will allow what is known as a streamlined installment payment arrangement. This calls for a monthly payment over a period of 60 to 72 months. Once such a payment arrangement is in place, there is an excellent prospect that the IRS will not file a notice of federal tax lien.
The IRS is required to allow a taxpayer access to sufficient funds from income to pay all necessary living expenses, such as food, clothing, rent, transportation, medical bills, insurance and miscellaneous household expenses.
If your finances are such that you have no income left over after paying necessary living expenses that could be devoted to the payment of back taxes, you are the category of what’s known as “currently not collectible.” What this means is that the IRS will not pursue you for collection, but the task over will remain on the books and will continue to accrue interest.
If in the future your income increases and you therefore afford to make an installment payment, the IRS will require you to do so. It’s important to note that from the date of assessment of tax, the IRS has 10 years to collect that tax. Once that 10 year period has expired, subject to certain exceptions, the IRS will adjust the tax balance for that particular tax year to zero.