If you're looking to resolve your tax debt and you don't want to pay the entire amount in a single payment, then you may be able to pay it in fixed monthly installments through an IRS installment plan. In order to make it feasible for individuals to resolve their back taxes, the IRS has various types of installment agreements, or IA's. Each IA has specific qualifying requirements, largely depending upon the amount of tax debt owed and a taxpayer's financial ability.
Paying a tax debt in fixed installments helps individuals retain their financial stability while resolving their liabilities. It's important to remember that while a taxpayer gets more time to pay with an installment agreement, penalties and interest on the debt continue to accrue each month.
Taxpayers that owe lower debt amounts don't necessarily have to share extensive details with the IRS, such as providing a financial statement. The IRS determines the monthly payment after discussing what is affordable for the taxpayer.
Individuals who owe a higher amount in tax debt may need to present a financial statement to the IRS when requesting an installment agreement. Based on a person's financial details, the IRS will determine how much the taxpayer can comfortably pay to resolve his or her liability.
Due to the relatively simple qualifying factors of an installment agreement, many taxpayers use it to resolve their debt. Only individuals who lack the financial ability to pay their full tax debt at once should apply for an Installment Agreement.
Labels: Installment Agreement, IRS, Tax Filing, Taxpayers