When resolving tax debt, taxpayers need to first explore their options to reach a resolution method that provides them with the most benefits in terms of saving time, effort and money. For those taxpayers that are not able to pay their entire tax bill in a lump sum, the IRS has payment plans. These plans can reduce tax debt, postpone payment and allow payment of back taxes in installments. Qualifying for either of the three methods of tax debt resolution stops collection action by the IRS.
Before applying for a tax debt payment plan, it is essential to consider all its requirements for eligibility of resolution. If a taxpayer defaults on a payment plan, the IRS terminates the agreement and begins collection action. Penalty may also be charged for defaulting on an agreement.
Installment Agreements are the most popular tax debt relief plans. Under an Installment Agreement, taxpayers can pay their tax debt in fixed monthly installments. Even though the IRS keeps charging penalty and interest on the amount of back taxes that remain unpaid, as the tax debt amount keeps decreasing with every payment, the amount of penalty and interest also decreases.
Tax debt resolution is not difficult if the right steps are taken for resolution. It is preferable to use the help of a tax professional or a tax service to explore resolution options and fulfill their requirements.