For many taxpayers, the idea of facing a large tax bill can be daunting. However, the IRS offers options for taxpayers who are unable to pay their tax debt in full. One of these options is the installment agreement, which allows taxpayers to pay back their tax debt over a period of time.
The IRS installment agreement is a payment plan option that allows taxpayers to pay their tax debt over a period of time, rather than paying the entire amount owed up front. This can be a useful option for taxpayers who are unable to pay their tax debt in full, but still want to avoid the penalties and interest associated with unpaid taxes.
There are a few different types of installment agreements available, including a long-term agreement that can be paid off over a period of up to 10 years. This option is generally only available to taxpayers who owe $50,000 or less in combined tax, penalties, and interest.
To apply for a long-term installment agreement, taxpayers must first file all required tax returns and be up-to-date on any current tax payments. They must also have the ability to make the monthly payments required under the agreement.
The monthly payment amount is based on the total amount owed, as well as the taxpayer’s ability to pay. In some cases, the IRS may require taxpayers to complete a financial statement to determine their ability to pay.
It’s important to note that interest and penalties will continue to accrue on the outstanding tax debt until it is paid in full. However, the installment agreement can help taxpayers avoid more severe penalties, such as wage garnishment or bank account levies.
Overall, the IRS installment agreement can be a helpful option for taxpayers who are unable to pay their tax debt in full. The long-term agreement option, which allows taxpayers to pay their debt over a period of up to 10 years, can be a useful option for those who owe $50,000 or less in combined tax, penalties, and interest. If you’re facing a large tax bill, consider speaking with a tax professional to determine whether an installment agreement is the right option for you.