In our previous blog posts in the Tax Resolution Services series, we’ve covered some of the potential options available to individuals, as well as businesses, that either owe an outstanding debt to the IRS, or are currently facing collection activities or penalties. The Installment Agreement is another one of these types of tax resolution services, and can be used in situations where a taxpayer would like to pay off their full debt to the IRS, but does not have the financial means to do so.
According to our Installment Agreement Service Page, If you can’t afford to pay what you owe to the IRS in full or in less than 120 days, the IRS allows you to break down that debt into monthly installments so that it is easier to pay down. An installment agreement allows you to pay down your tax debt while avoiding wage garnishment, levies and collections. Because of this pause on wage garnishment, levies and other collection activities by the IRS, the Installment Agreement does share a small similarity to the Currently Non-Collectible tax resolution service. However, with the Currently Non-Collectible option, the taxpayer is not making an agreement to repay their current debt, but rather, has been assessed by the IRS of being incapable of doing so. To learn more about Currently Non-Collectible, read our blog, Tax Resolution Services: Currently Non-Collectible, or visit our Currently Non-Collectible Service Page.
According to the IRS, on their page Additional Information on Payment Plans, as of Dec. 7th, 2020, an Installment Agreement, also known as a payment plan, is “an agreement with the IRS to pay the taxes you owe within an extended timeframe. You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame… Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action.”
As mentioned above, entering into an Installment Agreement with the IRS can help you to avoid the liens and levies associated with the IRS’s collection activities. However, as we note on our Installment Agreement Service Page, if you have found yourself at the end of the tax period owing more money than you can afford to pay off in one lump sum amount, sometimes the best course of action is to look into an installment agreement with the IRS. Your account will still accrue penalties and interest because you’re essentially making late payments but, it is often better than ignoring the debt completely and the IRS is usually happy to allow you to do an installment agreement in order to pay off what you owe them.
So while entering into an Installment Agreement with the IRS can help you to avoid levies and liens, your debt is still accruing penalties and interest. That’s why it’s so important to seek professional help if you or your business are experiencing financial troubles and owe a significant amount of tax debt to the IRS.
Here, at Bullseye Tax Relief, we offer a free initial consultation to all new clients. Give us a call today at (844) 582-3323 to speak with one of our tax resolution specialists today!