Can I Pay the IRS in Installments?

If you cannot pay your tax debt in full, the IRS may agree to let you pay it off gradually in monthly installments.

The IRS may be a difficult and impersonal entity to work with, but it is also highly logical and practical. The agency understands that it simply cannot take money that doesn’t exist. By allowing taxpayers to pay down a debt over time as a form of tax resolution, this can often be the easiest and best way for the agency to collect all the money it is owed. And, since the IRS collects interest on past due amounts, it does not actually burden the agency financially to allow someone to pay gradually.

Installment plans are often very viable options that work well for both the IRS and the taxpayer. Though you will usually have to pay penalties and interest, setting up a payment plan through successful tax resolution can get you back on a track, eventually becoming free of your tax debt.

An installment agreement can be either formal or informal. In an informal installment agreement, the taxpayer promises to make monthly payments in an agreed amount which will pay off his balance within two years. A formal installment agreement is a written agreement in which the taxpayer promises to make, and IRS agrees to accept, monthly payments in a specified amount. A taxpayer can allocate payments, such as against the trust fund portion of employment taxes, under an informal installment agreement but not under a formal installment agreement.

IRS collection personnel are generally reasonable people. If an IRS collection employee sets a taxpayer’s installment payment at an amount which the taxpayer’s representative believes is too high, the representative can speak with the collection employee’s manager. If the representative is unable to resolve the amount of the employee’s installment payment by talking with the collection employee’s manager, he can appeal the matter to the IRS appeals office.

What are the benefits of an IRS installment plan?

1. Avoid further penalties

If you don’t communicate with the IRS, they can take further action against you, including wage garnishment. Setting up an installment plan in good faith will keep you on good terms.

2. Help your credit

If your credit score took a hit due to unpaid taxes, setting up and sticking with an installment will help improve your numbers and help get them back to where they were prior to your audit.

3. Ensure future refunds

In order to make sure you receive federal tax refunds in the future, it’s important make sure your balance with the IRS is up to date. An installment plan lets you schedule payments so you’re up to date by tax season.

The IRS allows numerous ways for arranging to pay a delinquent tax liability. At Optima Tax Relief, our goal is to set up a payment option that works for you, pays off the tax debt in the shortest amount of time, and will keep the interest accumulation to a minimum.

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