While it is advisable to pay your taxes on time and in full, you might find yourself in a situation where you can’t clear the taxes due. Therefore, you will need to agree on a payment plan with the Internal Revenue Service (IRS) on how you will clear the pending debt.
It means that you will be allowed to clear your taxes in partial payments, depending on your repayment agreement, while avoiding federal tax liens. Here is more on what you need to know.
It depends on the amount of taxes owed
Your repayment plan depends on how much you owe the IRS. For example, if the amount is less than $10,000, you may qualify for a guaranteed installment agreement where you have three years to clear the loan through monthly deductions. However, if you owe more than that, you may have a more extended period to repay the outstanding taxes.
You can make changes to your payment plan
Tax repayments agreements are not cast in stone. If circumstances have changed since you entered the repayment agreement, you can request a revision of the current terms. You can change the periodic amounts or the dates when you are supposed to make the payments.
Your outstanding taxes still accrue interest
Having a repayment plan does not shield you from interest on outstanding taxes. What you owe will still attract interest. This is why it is advisable to clear your pending taxes in full if you are in a position to.
Make informed decisions
Learning more about your options will help you decide on the best way forward regarding your outstanding taxes. It is important to ensure that the payment plan works for you without being financially stretched.
Remember, the IRS can revoke the agreement if you miss a payment, which is why you should get a plan that works for you.