Are you considering settling your IRS debt ahead of schedule? Many people find themselves in a situation where they owe taxes and opt for an installment agreement with the IRS to manage the repayment. However, circumstances can change, and you might want to clear that debt sooner than planned.
However, you may be unsure if paying the IRS off early is a good idea.
Benefits of paying your IRS installment agreement early
Paying your tax debt early can reduce the amount of interest you accumulate over the life of your installment agreement. The IRS calculates interest on the outstanding balance, so the quicker you pay it off, the less you pay in the long run.
Also, settling your tax debt ahead of schedule can relieve the mental burden of having a debt hanging over your head.
How to proceed with an early payoff
To start the process of paying off your installment agreement early, you’ll first need to check your current balance, including any accrued interest and penalties.
Once you know the amount you need to pay, you can make a payment through the various payment methods allowed by the IRS. Make sure your payment specifies that it’s for the repayment of your installment agreement so that it is processed correctly.
Considerations before you pay off early
Before you decide to pay off your installment agreement early, it’s wise to consider your overall financial situation. Ensure that using extra funds to pay off tax debt won’t put you in a tight spot with other financial obligations. Maintaining a balance is important to avoid creating new financial problems while solving another.
Paying off your IRS installment agreement early can be a smart move if you can. You can always reach out to the IRS to discuss your account status and the best way forward based on your circumstances.