Tax debt must be resolved early to avoid the accumulation of IRS penalties and interest, as well as to avoid aggressive collection actions by the IRS. It is important for taxpayers to know that they can resolve their tax debt even if they cannot pay the entire amount of the debt. The IRS has various tax debt payment plans that can be used to resolve tax debt including Currently Not Collectible, Offer in Compromise and Partial Payment Installment Agreement.
Under Offer in Compromise and Partial Payment Installment Agreement, taxpayers are not required to pay their entire back taxes, but only a partial amount. These payment plans have strict qualifying factors that not all taxpayers fulfil. Therefore, it is essential to seek the help of a tax debt professional to understand the terms and conditions of each payment plan before applying for it.
Taxpayers who cannot pay any amount of back taxes may consider Currently Not Collectible to postpone payment of tax debt. The IRS only considers cases where taxpayers are in financial stress and any collection of the tax debt may force them into a financial crisis. To fully understand the specifics of Currently Not Collectible, taxpayers must use expert help.
Installment Agreement is one of the most accessible IRS payment plans for achieving tax debt relief because of its relaxed qualifying factors. Under the plan, taxpayers may pay their tax debt in fixed monthly installments until the debt is paid in full. The addition of penalties and interest on tax debt that is yet to be paid makes it more expensive than full payment in a lump sum, but it provides taxpayers with more time to pay.
Taxpayers may choose an appropriate payment plan to find relief from tax debt after careful research and consultation with a tax expert.