What is a tax installment plan and, how much do I pay?

A tax installment plan is an agreement between the IRS and a person who owes tax debt to the IRS to repay the said tax debt within a time period. The installment plan must be paid in full by the taxpayer within the time period agreed by both the IRS and the taxpayer to clear out the debt and avoid further penalties imposed by the IRS.

After initiate a tax installment plan with the IRS, the agency will immediately charge some fees from the taxpayer who wishes to negotiate for a tax installment plan, depending on how much debt the taxpayers have accumulated

1. The installment plan may include an interest fee
2. The installment plan may consist of some additional penalty fees
3. The installment plan will require an initial setup fee as required by the Office of Management and Budget

However, there are waivers or reimbursements for the user fees available to taxpayers at or below 250% of the applicable federal poverty level and entering a long term installment plan. Low-income taxpayers who enroll in the IRS’s Direct Debit Installment Agreement, which is essentially a direct bank transfer, can have their user fees waived. The low-income taxpayers who cannot enroll in the Direct Debit Installment Agreement due to lack of accessible systems or online connectivity may have reimbursement for the user fees after the installments have been fully paid off.

You will obtain certain perks for considering an installment plan, such as avoiding problems when applying or getting loans and avoiding bank levies and tax liens. However, it is worth remembering that you will need to pay interest on the tax debt you are repaying. 

Because of the extra fees that it the IRS added on to the final sum of your tax debt, it is often not recommended as the first solution to relieve your debt. It is much more common to pay out more money to use an installment plan than any other alternative. Other options like offers in compromises (OIC) and tax forgiveness programs that targets on cutting the amount of tax debt you have to repay are what tax attornies will recommend for reducing the total amount you have to pay in the end.

At Republic Tax Relief, our specialists and attorneys may help you negotiate with the IRS to maximize the possible reduction in fees and the debt you might have to pay with our proven methods in dealing with the IRS. Call us at (800) 203-7313 for consultations today.