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IRS Payment Plan: Different Federal Tax Debt Repayment Plans

There are different tax payment options you can pursue if you have tax debt or you completed your tax return and you realize you cannot pay. You should always pay the IRS or your State as much as you can and be sure to FILE your taxes (as we discussed with unfiled tax returns). There are no payment options if you fail to file.

IRS Installment Agreements or Payment Plans

If you can pay Federal taxes over time and you need longer than 120 days some type of Installment Agreement may be a good fit for you. Each differs slightly by the term of the period, the paperwork required, how difficult each is to obtain, and whether the balance must be paid in full. With state tax debt, payment plans can also be pursued. See if you qualify for an Installment agreement because if you don’t there are other options. However, realize that Interest and penalties are reduced but are still effective with an Installment Agreement. Therefore, sometimes a bank loan is recommended as you need to see which interest rate is higher if you do not want to try to settle your tax debt.

Payment Options In Full

If you can pay the IRS in full, or with one payment, it is highly recommended. However, this option is not feasible for many taxpayers. You could pay off your tax debt by borrowing from a bank (e.g. refinance your home or from a personal loan), family member, or friend. This can sometimes be a better alternative to paying by credit card. Some individuals will put their taxes on a credit card. Although this something you have to do, it should be a last resort because the interest and penalties on credit cards are typically much higher than if you receive a personal a loan or enter enter into a payment plan. Moreover, you normally will pay more because the IRS charges a surcharge for those who pay their tax bill’s with a credit card.

Short-Term IRS Payment Extension Options

If you have just finished preparing a tax return and realize you cannot pay the full amount,  you can typically buy yourself a few weeks in making full payments before any formal letters will be sent to you. The IRS does offer short-term payment options and some of these options carry penalties in addition to interest. Generally, these short-term payment options are for those who can pay their tax bills within 6 months. In extremely rare situations, the IRS will provide longer time frames. Find out more about these options and how penalties and interest apply.

Help With Payment Plans or Extensions

We can guide you through the payment plan request process to help you obtain a reasonable payment plan that fits within your budget. This can include a PPIA request or Installment Agreement. Don’t worry, if none of these are suitable for you, there are other options including but not limited to proving uncollectible status or submitting an Offer In Compromise (OIC). Payment plan extension requests are also provided by our team of tax attorneys, CPAs, and former IRS agents.