Harsh Reality: You want the easy way out. But with the IRS, there is none.You have to carefully weight the pros and cons of every IRS payment plan. If you make the wrong mistake, you could end up losing money instead of saving money.
Offer In Compromise: Settle your debt. The “Offer in Compromise” program allows you to settle your debt for a lower amount.
-You can save thousands of dollars.
-You can pay off your debt faster
-Extremely difficult to qualify for this program
-Applying extends the statute of limitations
-You have to include 20% of the offer and/or a $150 dollar application fee (with the initial offer). And it's nonrefundable.
Installment Agreement: Pay monthly. Prove to the IRS that you can pay off your debt in a given time period and they will allow you to make monthly payments on your Tax Debt. This required fully disclosing your financial situation.
-A good option if you have disposable income but can't pay the debt in full
-This Installment Agreement is a binding contract. You have to pay every month.
-If your income goes up, the IRS will want you to pay more.
Hardship Plan: Bitter poverty. Prove to the IRS that paying your debt will make you go without basic needs. They will give you time to get your finances in order.
-You won't hear from the IRS for months.
-You now have time to get your finances back in order
-Collections efforts will come back full force once your grace period runs out
-You'll be reviewed every few months to make sure you still qualify
Use Caution: Each case is different. The IRS is bad at handling cases on an individual basis. They are trained to do only one thing, and that's collect the balance in full. An IRS representative could recommend the wrong solution to you. Use caution, and research before you choose any of the above payment plans.