IRS Restrictions for Tax Debt Resolution

Last updated on February 27, 2023

Every IRS debt resolution plan has specific restrictions, some of which are negotiable. As every tax debt case is different, there is scope of negotiations with the IRS. To qualify for any tax debt payment plan, the applicant must have filed all past tax returns. Even if they cannot pay their entire tax bill, they must pay as much as they incur less interest on the debt amount left to pay.

Before applying for a payment plan, ensure that you have considered options that can help you to pay more comfortably. Many taxpayers take loans to pay their full or partial tax debt to save money on interest and penalties. It is vital to consider every option before applying for a payment plan.

Installment Agreement is the most commonly used payment plan for IRS debt resolution. It allows you to pay your tax bill in fixed monthly installments. To save money on interest, you may pay the maximum amount you can in every installment so that the full tax debt is paid as quickly as possible.

Your future refunds, if any, are applied to fulfilling your tax debt until the total tax bill is paid. The IRS charges a fee for applying for a payment plan, and applies penalties for applying for a payment plan the applicant clears does not qualify for.