Paying Tax Debt in Installments

Posted on September 19, 2022

Paying Tax Debt in Installments

The early resolution of tax debt is important to avoid additional penalties, interest, or the risk of collection actions. If they have the financial strength to pay the tax debt in full, but not in a single payment, taxpayers can apply for an IRS Installment Agreement.

Tax Debt Payment Using Installment Agreement

Satisfying the tax debt in monthly payments helps taxpayers resolve their liability comfortably over a period of time. The resolution of tax debt can be achieved by various methods, but for taxpayers who have the financial capability to pay their entire tax debt in payments, an Installment Agreement is most appropriate.

Under the agreement, taxpayers pay a fixed amount in monthly installments with interest and penalties until the entire debt is repaid. The amount to be paid in monthly installments is pre-determined by the financial capability of a taxpayer and set by the IRS once the taxpayer is accepted within the program.

The advantage of using an Installment Agreement is that the taxpayer gets an extended period of time to pay the tax debt. Another advantage of being under a payment plan is that it protects a taxpayer from collection actions by the IRS.

A disadvantage of paying the debt through an Installment Agreement is the penalties and interest that are added while the debt remains unpaid. This accrual increases the total debt amount of back taxes yet to be paid.

Tax Debt Payment using Partial Payment Installment Agreement

Those taxpayers who cannot pay their entire amount of back taxes and can only resolve their tax debt through a partial tax debt reduction should consider applying for a Partial Payment Installment Agreement.

Under this IRS payment plan, taxpayers pay a reduced amount of the tax debt in monthly payments because of their inability to pay their entire tax debt amount. Only those with no means to pay the entire tax debt should consider applying for this payment plan.

Advantages of Using Tax Debt Help

Using the services of a tax professional allows taxpayers to choose the most appropriate tax debt payment plan to resolve their tax debt, prepare their case, and represent it before the IRS. A tax professional utilizes its resources to help taxpayers achieve the most beneficial resolution to their tax problems.

Hiring a tax professional may become essential for resolutions that require representation and negotiation. To assist them in their search for a legitimate tax resolution service, we have rated and reviewed some of the top tax resolution services in the country. It will help taxpayers stay protected from fraudulent companies, and get the right help for the successful resolution of their tax problems.