A number of individuals with tax debt use installment agreements to settle their liability in payments, rather than all at once. Even though taking care of the full debt amount in one payment is advantageous, as it minimizes the penalties and interest to be paid, installments tend to be more convenient for most.
An installment agreement provides you more time to pay. You can handle your tax debt over a period of years if you qualify for such a plan. For many taxpayers, it provides them the opportunity to retain their financial stability while paying off the debt.
Those who choose installment plans also get the benefit of knowing how much they’re expected to pay monthly. Under an installment agreement, you pay your entire tax debt in fixed monthly installments. How much you pay each month depends upon your financial ability and the amount of your debt. As you’re reviewing plan options, it’s important to consider penalties, interest and your financial capability, before committing to an agreement.
Installment agreements can be easier to obtain than tax debt reduction plans. If the amount of tax debt you owe is not substantial, the IRS may request only basic financial information to determine your ability to pay. Many taxpayers ultimately choose an installment agreement to establish a formal resolution and pay back the tax debt.