Achieving Relief from Tax Debt through Monthly Payments

Posted on September 5, 2022

Achieving Relief from Tax Debt through Monthly Payments

Paying a tax debt through a payment agreement is one of the easiest methods to resolve a tax liability because it does not require extensive negotiations with the IRS. Taxpayers with the financial capacity to pay their entire amount of tax debt, but not in a lump sum, can pay it with monthly payments through an Installment Agreement.

The IRS’ Installment Agreement is a debt payment plan with various types, including Streamlined Installment Agreements, Guaranteed Installment Agreements, Partial Payment Installment Agreements, and “Non-Streamlined” Installment Agreements. Taxpayers should hire a tax help company to help choose an appropriate payment plan to fulfil their tax debt quickly.

Qualifying Factors of Tax Debt Relief Payment Plans

Taxpayers are required to file all past tax returns before applying for a tax debt payment plan. The IRS will also request, if taxpayers have the ability, to consider paying the tax debt in full by taking out a loan. The interest the IRS charges on a tax debt amount is higher than what the banks charge on a loan. Therefore, taxpayers may consider paying their tax debt in a lump sum through a loan.

It is important for taxpayers to understand that they are required to pay the monthly installments each month until the tax debt is paid in full. Defaulting on an established payment plan attracts penalties from the IRS that can increase the overall debt amount.

Until a tax debt is fully satisfied, the IRS will apply all current and future refunds to it.

Avoiding Default on Tax Debt Relief Payment Plans

After establishing a payment plan to resolve tax debt, taxpayers must not to default, as collection actions can swiftly be put in place by the IRS, and re-establishing a payment plan can be complex and difficult. To keep an Installment Agreement current, taxpayers must remember to:

  • Pay the minimum monthly payment on time
  • Include their name, address, Social Security Number, phone number, tax year and tax return type on every monthly payment
  • File tax returns on time
  • Contact the IRS to alter an existing agreement if unable to make full payments on time

To avoid defaulting on an agreement, it is important to choose an agreement that is affordable. Using the help of a tax service is vital in choosing the appropriate tax debt payment plan according to the particulars of the case, and fulfilling its requirements to resolve a tax debt successfully.

Taxpayers who want to pay their tax debt in monthly installments should gather information on the requirements of the various Installment Agreements, and hire a competent tax service to help resolve the tax debt successfully.