When your tax debts are simply too much for you to pay all at once, you can enroll in an IRS payment plan to make monthly payments on the debt. By beginning an installment agreement, you agree to pay the full debt over time, along with interest, penalties and a onetime user fee for setting up the agreement.
Payment plans make sense for a lot of people with past due or unpaid taxes, but there are multiple options you need to consider. A tax professional helps guide you through the process to determine what route would benefit you the most. You may qualify for an Offer in Compromise instead, which lets you pay a negotiated settlement amount instead of the full debt.
To begin an installment agreement, you need to have filed all tax returns, and be current with this years tax payments. It’s also best for you to weigh the merits of paying with funds from a loan or credit card versus accepting the payment plan and its interest and fees.
An IRS payment plan can be set up for payment by direct debit or payroll deduction, as well as traditional paper payments. Depending on how much you owe and the complexity of your income, tax debts, and assets, the nature of your installment agreement varies. Getting a tax professional to provide expert advice can ensure that you make the right choice and set up the optimal payment program for your situation.
Once you begin an installment agreement, it operates like a loan in that you’ll need to make on-time, minimum payments each month in order to avoid entering default or losing the agreement. Interest and penalties apply to delinquent installment agreements, so you need to set up a repayment solution you can handle.
The good news is that there’s a method for anyone to pay off taxes and get in good standing with the IRS. You can trust a tax expert to help you identify your next steps in handling a payment plan or other choice of settling up your tax debt. Contact us to let us help you with your IRS debt.