Owing taxes to the IRS can feel overwhelming. It can trigger stress and uncertainty, especially if the amount seems unmanageable within your current financial situation. However, the IRS offers several repayment plans designed to help taxpayers manage their tax debt in a structured and affordable way.
Understanding the different repayment plans available to you can help you take control of your financial future. By evaluating each plan, you can find a solution that aligns with your financial capabilities, easing your burden while ensuring that your tax obligations are met.
Short-term and long-term payment plans
One of the options available is the short-term payment plan. If you can pay off your tax debt within 120 days, the IRS offers this plan with no setup fee. However, remember that penalties and interest will continue to accrue until the debt is paid in full.
If you need more time, long-term payment plans, also known as installment agreements, allow you to pay your debt over a more extended period. There are two types of long-term plans: direct debit and non-direct debit. Direct debit installment agreement involves automatic monthly payments from your checking account, while non-direct debit plans require manual payments.
Offer in Compromise
Another option offered by the IRS is the Offer in Compromise (OIC). This plan lets you settle your tax debt for less than the total amount owed. However, this option is only available for some. The IRS carefully considers your income, expenses, and asset equity before accepting an OIC.
You must ensure that you choose the option that works best for your situation. In some cases, it’s best to consult someone familiar with these situations to ensure you completely understand your options and rights.