IRS Requirements for Tax Resolution

Last updated on August 28, 2023

When resolving back taxes, individuals should be aware of the IRS’ requirements regarding payment options. Even though each case is unique, there are certain qualifications that every taxpayer must meet. It’s important to apply for a payment plan only after considering all of the applicable eligibility requirements.

Back Taxes Resolution: Payment of Penalties and Interest

The IRS charges penalties and interest on tax debt, which taxpayers don’t always consider when they’re determining what they owe. That may lead them to apply for a payment plan that does not satisfactorily resolve their back taxes. In order to choose the appropriate payment plan, taxpayers have to include both penalties and interest in the total amount owed.

When taxpayers receive an IRS notice regarding the tax debt, the amount of debt to be paid is included in the notice. It’s always a good idea to verify that IRS calculations are correct.

Back Taxes Resolution: Paying the Maximum Amount

The IRS expects individuals to pay as much toward their debt as possible. When taxpayers apply for any payment plan, the IRS carefully reviews their finances. This includes income from all sources and assets; this helps them understand their ability to pay. If a taxpayer applies for tax debt reduction but has the means to pay, the IRS may charge a penalty. Therefore, it’s essential to apply for the correct payment plan.

While the IRS endeavors to get the maximum amount of a debt paid, they also permit reductions in certain circumstances. In addition to payment plans, there are other methods of reducing the total amount of tax debt such as penalty abatement, innocent spouse, etc.

Taxpayers who owe large debts, or those who cannot pay it in full, should consult with a licensed tax professional to explore resolution options.

Paying of Tax Debt in Full

The easiest method to resolve tax debt is to pay the full tax debt amount in a lump sum. Even when taxpayers cannot pay their tax debt in full, they should try and pay as much up front as possible. This will help save on penalties and interest.