An installment agreement with the Internal Revenue Service (IRS) may be the taxpayer’s best solution for settling tax debt by making payments rather than paying in full at once.    Under this agreement, the IRS will accept regular scheduled partial payments over an extended amount of time until the debt is fully paid.  The IRS sets the amount and duration of the payments based on the taxpayer’s ability to pay the amount owed within the specified time.  A tax attorney or certified tax professional can assist the taxpayer with filing the appropriate documents to submit the installment agreement to the IRS.

With an installment agreement (sometimes called an IRS payment plan), penalties and interest on the debt will continue to accrue and over time can be more costly than paying the full tax liability immediately.   It also might be the only solution for individuals that do not have the means to pay the debt in a lump sum.   Similar to a loan provided by a bank, interest and penalties are assessed on the unpaid balance.  This may be the best option in situations where the taxpayer does not qualify or get relief via an Offer in Compromise, Bankruptcy Relief, or a Statute of Limitations Expiration.

Finalizing an installment agreement may not stop the IRS from filing a tax lien against the taxpayer , however, the IRS may not collect on personal property during the time in which the installment agreement is being reviewed for approval.  This may provide some temporary relief from IRS collection action.

A tax attorney will work closely with taxpayers to develop their financial profile and negotiate the Installment Agreement with the IRS.  Tax professionals are adept in understanding the IRS requirements and can explain the payment plan options that may be available under the installment agreement.

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