There are many ways to pay back tax debt, but taxpayers need to choose a method that will provide them with most advantages. Choosing a payment plan depends largely on the amount of tax debt and the financial capability of taxpayers.
Those taxpayers who have smaller tax debt should pay off the entire amount in a single payment to save money in interest. As most taxpayers who have back taxes cannot afford to pay back the entire tax debt amount, they may choose from various IRS tax debt payment plans, including an Offer in Compromise, Currently Not Collectible, an Installment Agreement and a Partial Payment Installment Agreement.
Taxpayers may qualify to postpone their tax debt payment, pay a reduced tax debt amount, reduce penalties and interest, or pay their debt in installments. Which tax debt plan is available to taxpayers depends upon how much debt amount a taxpayer has and their ability to pay.
Some taxpayers apply for the most advantageous payment plan, such as an Offer in Compromise, without considering the particulars of their case. Taxpayers must remember that each payment plan has strict qualifying guidelines that must be followed.
Applying for an IRS plan taxpayers clearly do not qualify for is discouraged by the IRS with additional penalties. Therefore, taxpayers must either seek tax help or gain in-depth information about tax debt payment before contacting the IRS.