Resolution of Back Taxes with Partial Payment

Last updated on August 22, 2022

A tax debt amount will grow over time. Many taxpayers delay paying their back taxes, believing they will be able to pay the amount once they save money. However they find that IRS interest and penalties has accumulated over the years, substantially increasing the total debt amount. Back taxes resolution, then, can be achieved by qualifying for an IRS tax debt payment plan.

Back Taxes Resolution through Offer in Compromise

An Offer in Compromise is an IRS debt payment plan that allows a taxpayer to pay a reduced amount of tax debt. The IRS considers a taxpayer’s financial condition before qualifying them for the plan. Only taxpayers who do not have the income and assets to pay back the tax debt will be considered for a possible reduction of their tax debt. The IRS also considers a taxpayer’s ability to get a loan to pay back the tax debt.

A resolution can be achieved comfortably through an Offer in Compromise when taxpayers find they are unable to pay the entire tax debt amount. A resolution helps them to avoid IRS collection actions, such as a tax lien or levy, which can greatly damage a taxpayer’s ability to receive new credit.

Back Taxes Resolution through Partial Payment Installment Agreement

A Partial Payment Installment Agreement is an IRS payment plan that allows taxpayers to resolve their back taxes by paying a partial amount of the tax debt in monthly payments. Taxpayers who are unable to pay their entire tax debt, but have the ability to pay a certain amount should consider applying for a Partial Payment Installment Agreement.

Only taxpayers who cannot fulfil their entire tax debt even by selling of assets, getting a loan, or using their savings should apply for a Partial Payment Installment Agreement because the IRS explores all options to get the maximum amount in tax debt before allowing a tax debt reduction.

Penalty Abatement for Reduction in Tax Debt Amount

Penalties that the IRS charges for non-compliance substantially increase the tax debt amount. It is because of penalties and interest that the total tax debt amount increases. Although interest is not deducted by the IRS, penalties can be removed or reduced. The taxpayer needs to provide a ‘reasonable cause’ for the non-compliance. A reasonable cause can be a force that was beyond the control of the taxpayer such as natural disasters, fire, theft, divorce and illness. If such a cause led to the non-compliance, taxpayers can hope removal or reduction of penalties.

A resolution does not necessarily mean full payment of taxes. Taxpayers can avoid IRS collection actions and the accumulation of IRS penalties and interest by using IRS debt payment plans that allow partial payment of back taxes.