5 Things to Know Before Agreeing to an IRS Payment Plan
If you’re struggling with tax debt, an IRS payment plan might seem like a good lifeline. However, it’s crucial to understand the full picture before diving in.
Depending on your financial situation, other options may be available to save you more money with little added effort. Before agreeing to a “standard issue” IRS payment plan, you should check your eligibility for IRS Forgiveness Programs that work with your budget and reduce the amount you owe.
Check Your Eligibility for Tax Forgiveness in 60 Seconds
Here are five key points to consider before you agree to an IRS payment plan:
1. IRS Payment Plans Don’t Stop Interest and Penalty Fees
Interest and penalty charges will continue accumulating throughout your repayment period, meaning you will pay significantly more than your original tax debt. However, many Tax Forgiveness Programs do stop penalties and interest from compounding your tax debt. Before agreeing to an IRS payment plan, you should check your eligibility for these programs.
Take the 60-Second Survey to Find Out if You Qualify for IRS Forgiveness
2. Payment Plans Don’t Prevent Tax Liens
Entering into a payment plan does not protect you from all collection actions. Even if you’re faithfully making payments, the IRS can still file a tax lien against your property. This can damage your credit score and make it difficult to sell or refinance your home.
3. Missed Payments Can Have Serious Consequences
If you miss even one payment, the IRS can terminate your payment plan agreement and begin aggressive collection actions. This can also harm your credit score, making it harder to secure loans or credit in the future.
4. You Need a Clean Tax History
To qualify for a payment plan, you must file all unfiled tax returns. If you skipped tax filing for a few years, this can be complex and time consuming. You’ll need to hire a trusted tax professional to bring you back into compliance.
5. There May Be Better Alternatives
While an IRS payment plan might seem like the obvious choice, it’s not always the most cost-effective solution.
If you know the total amount you owe the IRS, you can easily estimate your potential monthly payment amount. Simply divide your total tax debt by 72 months (the standard repayment period) to estimate your monthly payment (your actual payment will be higher because of additional interest and penalties).
If this monthly payment seems unmanageable, you may be able to qualify for tax forgiveness programs that reduce your debt or lower your monthly payments, like Offer in Compromise, Partial Payment Agreements, or Currently Not Collectible status.
Check Your Eligibility Now
Work With a Trusted Tax Pro to Weigh Your Options
Working with a trusted tax professional can yield far better results than taking the standard IRS payment plan. Tax pros can screen your eligibility for tax credits and deductions that reduce your tax debt. They will fight for you, negotiating with the IRS to minimize your total liability and reduce your monthly payments.
Don’t let tax debt overwhelm you. Remember, every day you wait will cost you more in penalties and interest. Act now to take control of your financial future and take our brief tax survey to discover if you qualify for Tax Forgiveness Programs that can reduce your tax debt.