IRS Payment Plans for Tax Debt

Last updated on October 18, 2022

If taxpayers cannot pay their full tax debt in a single payment, they need to arrange an IRS tax debt payment plan. The IRS has many payment plans, including Partial Payment Installment Agreement, Offer in Compromise, Currently Not Collectible, and Installment Agreement. Payment plans allow taxpayers to resolve their tax debt without paying the full amount in a lump sum and avoid collection actions.

Installment Agreement is an IRS payment plan that allows taxpayers to resolve their tax debt over a period of time. Taxpayers can pay the total debt amount in monthly installments to resolve their back taxes. It is advisable to pay as much as possible in monthly installments to avoid the piling up of penalties and interest charged by the IRS on any amount of debt that remains to be paid. Under Partial Payment Installment Agreement, the tax debt is reduced and the balance is paid in installments.

Offer in Compromise is a tax debt reduction plan that allows taxpayers to resolve their tax debt through paying the reduced amount of tax debt. The plan has strict qualifying factors. Taxpayers that qualify for the plan have the option of either paying the reduced tax debt in a lump sum or in installments.

Currently Not Collectible allows taxpayers postponement of payment. Taxpayers that receive Currently Not Collectible status because of financial hardship get extended time to pay the debt. All IRS debt payment plans are designed to help taxpayers resolve their back taxes comfortably.