The Internal Revenue Service (“IRS”) permits taxpayers to use payment plans to make payments on taxes owed or unpaid tax liabilities.  These payment plans go by different names: installment agreement, payment agreement, online payment option, payment option, or a payment plan.  The Installment Agreement allows for the full payment of the tax debt in smaller, more manageable amounts.  The common thread among each of the different payment plans is to make payments on unpaid tax if you are unable to immediately pay your unpaid tax balance in full.  Similarly, once all payment plans have been considered by the IRS and it is determined that you do not qualify for an installment agreement, you may opt to file an offer in compromise (“OIC”).  The OIC, which is discussed in detail under Offer in Compromise, is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability trough payment of less than the full tax liability.  

Payment of less than the full tax liability sounds like a good deal, but you can save money by paying the full amount you owe as quickly as possible to minimize the interest and penalties you’ll be charged on the unpaid tax liability.  However, those taxpayers who are unable to pay the full tax liability immediately should consider an installment agreement as a reasonable payment option.   

To be eligible for an installment agreement, you must have filed all required tax returns and paid your estimated tax payments if required.  Those taxpayers wishing to pay off an unpaid tax liability through an installment agreement should consider the following guidelines: 

• Tax liability of $25,000 or less in combined tax, penalties, and interest can use the IRS online payment agreement program; and
• Tax liability of more than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement. 

Contact a tax professional to review your and Installment Agreement (Form 9465) and Collection Information Statement (Form 433) to determine the feasibility of an installment agreement or other payment options.

For more information or questions about your specific tax matter, please contact the office or click CONTACT US.

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