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IRS Payment Plans: Different Federal Tax Debt Repayment Plans

The Federal Government offers several different IRS payment plans or options for people with tax debt. You can also use these options if you have completed your tax return but can’t afford to pay the tax owed.

IRS Installment Agreements

An installment agreement is when you make regular payments on your tax debt to the IRS. If you have sufficient income to make payments over time, you should apply for this option. There are a few different installment plans.

With most agreements, you make payments on the whole balance. However, there are also partial payment installments where you make payments on a partial balance.

You must apply for installment plans, and there are different paperwork requirements for each plan. When you are on an installment plan, penalties and interest continue to accrue on the account, but the failure to pay penalty is generally cut in half (compared to not being on an installment plan). If you can get a bank loan with a lower interest rate, you may want to use that instead.

Payment Options In Full

Paying your tax debt in full is the best way to avoid interest, penalties, wage garnishments, and levies. If you have the money, you should always pay your tax debt.

Some taxpayers take out loans, refinance their homes, use credit cards, or borrow from friends and family so they can pay in full. If you decide to use a loan or credit card, always compare those interest rates to the interest rates the IRS would charge you on an installment plan. The IRS rates change quarterly.

Short-Term IRS Payment Extension Options

There are also a few short-term payment extension options. As long as you file on time, you can pay your taxes about 55 days late, without risking your assets. That is not an official plan, but if you just need some extra time, it can work.

Officially, the IRS offers a 120-day extension with no setup fee. You have to apply online, but most people are accepted. In hardship cases, the IRS may grant six month extensions.

Help With IRS Payment Plans or Extensions

Our partner team of tax attorneys, CPAs, and former IRS agents can guide you through the process and help you obtain a reasonable payment plan that fits with your budget. That can include payment plans on the full balance, Partial Payment Installment Agreements (PPIA), Offers in Compromise (OIC), extension requests, or even establishing uncollectible status.