Hi again. PDtax, the original Expert. Thanks to Robin D. for going further than I did. Let me clarify my answer.
In community property states, IRS allows for a shared method for determining income and expenses for installment agreements. The Internal Revenue Manual guides IRS employees in what/how they can collect taxes, and their Manual is invaluable as a source of what they will do.
http://www.irs.gov/irm/part5/irm_05-015-001.html#d0e2495 is the link I used to their information regarding installment agreements. From that page:
Generally, when determining ability to pay, a taxpayer is only allowed the expenses he/she is required to pay. In cases where a taxpayer lives with a non-liable person, it may be necessary to review other income
into the household and any expenses shared with the non-liable person in order to determine the taxpayer's allowable portion of the shared household income and expenses.
Although the assets and income of a non-liable person may be reviewed to determine the taxpayer's portion of the shared household income and expenses, they are generally not included when calculating the amount the taxpayer can pay. One notable exception is community property states. Follow the community property laws in these states to determine what assets and income of the otherwise non-liable spouse are subject to collection of the tax.
Community Property States: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In addition, Alaska is an opt-in community property state; property is separate property unless both parties agree to make it community property through a community property agreement or a community property trust. The territories of Puerto Rico, Guam and the Commonwealth of the Northern Mariana Islands also allow property to be owned as community property. See IRM 22.214.171.124.2.1 , Community Property.
Regardless of whether community property laws apply, secure sufficient information concerning the non-liable person to determine the taxpayer's proportionate share of the total household income and expenses. Review the entire household's information and:
Determine the total actual household income and expenses.
Determine what percentage of the total household income the taxpayer contributes, i.e., taxpayer's income divided by total household income.
Determine allowable expenses.
Determine which expenses are shared and which expenses are the sole responsibility of the taxpayer, e.g., child
support, allowable educational loan, union dues.
Apply the taxpayer's percentage of income to the shared expenses."
Expert again...A percentage of household income and expenses is used to determine the installment agreement income and expenses for a liable spouse. Your income is included in the math, but the allocation is to be followed by IRS to determine the actual amount IRS will accept as an installment agreement payment.
Thanks again from Just Answer. If you have follow up to ask, since more than one Expert has assisted, please ask for the Expert of your choice by name for further assistance. I'm PDtax.