An installment agreement allows an individual with tax debt to pay the entire back tax amount in monthly installments over a specified period of time. Taxpayers who are unable to satisfy their entire tax debt at once may find a payment plan advantageous.
There are many types of installment agreements, which may be chosen based on the amount of tax debt owed and the taxpayer’s financial ability. When applying for an installment agreement, taxpayers should consider all eligibility requirements for the plan they’ve selected.
Individuals who owe $10,000 or less in tax debt may use the guaranteed installment agreements to pay their back taxes. It allows a taxpayer to pay the debt in fixed installments over 36 months or less.
Those who owe $25,000 or less in tax debt may use the streamlined installment agreement to resolve their tax debt. Taxpayers that qualify for this payment plan can pay their entire tax debt in 72 months or less.
Installment agreements may also include tax debt reduction. If a taxpayer does not have the capability to pay the entire tax debt amount, the IRS may allow a taxpayer to pay an affordable monthly amount until their financial situation improves, or the debt expires. It should be noted that in cases such as these, the IRS may place a lien on the taxpayer.
If the tax debt is more than $25,000, a payment plan can be established by negotiating the particulars of the case with the IRS. Larger liabilities may take more time to pay and, as such, may require a unique resolution plan with the IRS.