Payment Options

For some people, getting a tax refund is nothing more than a passing dream.  For these same peoHow to pay your tax debtple, paying the full amount of the taxes owed in a timely manner is much more easily said than done.  But never fear, the IRS provides taxpayers with a few payment options in order to fulfill their tax obligations.

The first option, whicih comes to no surprise, is to pay the tax in full.  But lets be honest, if a person has already paid or has the capability of paying the full amount of their taxes on time, then that same person probably is not reading this blog.

The second option is to apply for an installment agreement.  An installment agreement allows a taxpayer to pay the full amount of the tax over an extended period of time or over the life of the ten (10) year statute of limitations.  Generally, there are three types of installment agreements that a taxpayer can qualify for depending on the amount of the individual’s tax debt.  An installment agreement is a fairly routine procedure that is relatively easy to obtain.

The third option is to apply for a currently not collectible status.  The currently not collectible status is a determination by the IRS that an individual has no money to pay the tax after considering their reasonable living expenses.  At first this option sounds like the best option to most people, but this status is very hard to obtain and is only used by the IRS as a last resort collection method.

The fourth option, and normally the most advertised on the radio and television, is the offer in compromise.  The offer in compromise, known to the world as the “pennies on the dollar plan”, allows an individual to work out a deal with the IRS allowing them to pay a portion of the tax debt in satisfaction of the entire tax amount owed.  Although this payment plan is harder to get than an installlment agreement, this payment option is also not uncommon and is performed on a daily basis.

Not all of these payment options is for every taxpayer.  It is important to know which payment plan you qualify for, which plan best suits your specific situation, and which plan will allow you to pay the least amount of interest and penalties.

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