IRS payment plan question

Yes, payment plans that do not reduce the overall liability are common - but NOT in your case. A $290 per month payment would pay off a $10,000 liability in a little over three years. It may be that when you entered into the agreement the tax was $10,000 but the interest and penalties had not been applied yet - or perhaps another adjustment was made or another tax year added. You can order a Transcript of Account to see what has happened.

I'd guess that the initial $10,000 was the total tax on late filed returns, and the $17,000 includes tax, penalty and interest. It's not the payment plan that caused the amount to almost double, it's the penalty and interest that accrued because you didn't file and pay timely. Bankruptcy won't help you yet. Income Tax debt can't be discharged until it is well aged. Even then, the tax lien will continue on your non-exempt assets. Offer In Compromise acceptance is unlikely on this relatively small amount with ample collection statute remaining. $290 per month on $17,000 seems fair.

Since you mention back taxes were a certain figure (10,000), you didn't include interest and penalties which IRS has assessed. Get a transcript of your account and you'll see what was added and when. From now on however, only interest and failure to pay penalty will be assessed. ChEAr$, Harlan Lunsford, EA n LA

IRS will accept a payment plan that pays off the initial amount in 60 months (or less). $290x60=$17,400 Sounds like you were somehow unaware that you owed $17,000 when the plan was set up. Interest will continue to accrue, but your debt will shrink.