How to Pay IRS Tax Debt

Last updated on May 29, 2023

If you have the ability to pay your tax debt, then you must explore methods that will allow you to pay your debt most comfortably. If you can pay your tax debt in full in a single payment, you will save on IRS penalties and interest charged on unpaid taxes. If you believe that paying your tax debt over an extended period of time will be more convenient, then you may apply and qualify for an Installment Agreement payment plan.

Installment Agreements

For paying tax debt in monthly installments, you will need to apply for an Installment Agreement. There are various kinds of Installment Agreements, depending on the amount of tax debt you owe. If you owe less than $10,000 in tax debt, then you will typically not need to provide extensive financial information to the IRS. Resolution of small tax debts is simpler than resolving large tax debts. In case of the resolution of tax debt over $50,000 using Installment Agreement, the IRS will require a financial statement.

The IRS requests the financial information from taxpayers to determine how much they can pay in a monthly installment, and how much time a taxpayer needs to fulfill the entire tax debt. Remember that when you make payments in installments, the IRS will continue to charge penalty and interest on the amount of tax debt that still remains to be paid.

Partial Payment Installment Agreement

If your financial condition does not allow you to pay your entire tax debt, then you may apply for Partial Payment Installment Agreement. With this agreement, the IRS reduces your total debt so that you can pay the remaining amount in monthly installments.

This tax reduction plan must only be used if paying your entire tax debt will push you into financial difficulty. The IRS reviews financial information before qualifying taxpayers for this payment plan.

Offer in Compromise

If you are only able to pay to satisfy your tax debt partially, then you will need to qualify for a tax debt reduction plan. Offer in Compromise is a payment plan that reduces the amount of total tax debt so that you can pay the balance and resolve your case. After qualifying for Offer in Compromise, you can pay the reduced tax debt and permanently resolve your tax debt case.

Before paying your tax debt, you must explore the various methods of payment to choose the one that helps you to save on penalties, interest and tax debt, and also provide you a comfortable time frame to resolve your IRS debt.