If you owe taxes to the IRS and can’t pay the full amount right away, you have options to set up a payment plan. The IRS offers several choices that can help you pay off your taxes over time. Understanding these options will make it easier to manage your payments and stay on good terms with the IRS.
Installment agreements
The most common option is an installment agreement. This plan lets you pay your tax debt in smaller amounts over time. If you owe $50,000 or less, you may qualify for a streamlined installment agreement. This type of plan doesn’t require much paperwork, and you can usually make monthly payments until the balance is paid off.
Offer in compromise
An Offer in Compromise (OIC) lets you settle your tax debt for less than the full amount you owe. The IRS will only accept this option if they believe they won’t be able to collect the full debt from you. It’s a good choice if you’re facing financial hardship or a low income. To apply, you’ll need to submit a detailed financial application, and the IRS will decide whether to accept your offer.
Short-term payment plans
If you think you can pay off your balance within 120 days, a short-term payment plan could be right for you. With this plan, you don’t have to pay a setup fee, but you’ll still owe interest and penalties on the debt. It’s a good option if your financial situation will improve soon, allowing you to pay the balance quickly.
Direct debit installment agreement
If you prefer automatic payments, a direct debit installment agreement may work best. With this plan, your monthly payments are automatically deducted from your bank account. It’s an easy way to ensure you don’t miss a payment and avoid more problems with the IRS.
Exploring these options can help you stay on track with your payments and avoid serious issues with the IRS. Whatever plan you choose, it’s important to keep up with your payments to avoid additional penalties.