Most taxpayers who have a substantial tax debt find it difficult to pay the entire amount in a single payment. Even if you have the financial ability to pay the full amount, you may choose to pay in installments if paying the full amount all at once would upset your financial stability. The IRS offers installment agreements that allow taxpayers to pay their tax debt in monthly installments. There are various kinds of installment agreements, categorized mainly by the amount of tax debt to be paid.
Before opting to pay tax debt through an installment agreement, it is important to know that paying through any type of installment agreement is more expensive than paying IRS debt in full. The IRS charges penalty and interest on tax debt even if a taxpayer has qualified for a tax debt payment plan and has begun to make payments. Therefore, the longer it will take you to pay the tax debt, the higher the amount of penalties and interest you will need to pay.
Making payments in installments is advantageous for those taxpayers that are not financially capable of paying big lump sum amounts. This plan provides them a way to resolve their tax debt as comfortably as possible. The amount a taxpayer needs to pay in monthly installments is determined by reviewing the overall financial condition of the taxpayer. It benefits a taxpayer to pay as much as possible in an installment, so they can pay off their debt more quickly and pay less in penalties and interest.
Before choosing any IRS tax debt payment plan, it is essential to explore other options so the most beneficial plan is chosen, and the tax debt resolved successfully.