Last time, we began discussing just how nightmarish it can be for people who are already pushed to the limit financially to learn from the Internal Revenue Service that they are responsible for paying off a rather substantial tax debt.
We also discussed how even though it might be tempting for those who find themselves in these scenarios to just ignore the matter and hope that the IRS simply goes away, this is perhaps not the wisest course of action.
As dire as the foregoing conversation may seem, people should nevertheless take heart in the fact that there are a few viable options for those who want to pay back the money owed to the federal government yet are limited in their abilities to do so.
As implied by the name, this is essentially an agreement whereby a person promises to pay the IRS a set amount of money every month — up to a maximum of 72 months — until their tax debt is settled.
As you might imagine, installment agreements are the single most popular way of resolving tax debt and often very effective. However, experts indicate that anyone considering it as an option would be wise to keep a few factors in mind:
- Interest and penalties will continue to accrue while you make monthly payments, meaning the longer you take, the more you may end up paying to the IRS.
- Tax returns must continue to be filed and any accompanying debts paid on time while you make monthly payments (failure to do so can void the installation agreement).
- The statute of limitations for the IRS to collect on the debt will be automatically extended by two years.
We will continue to explore some of the other viable payment options for tax debt in a future post.
In the meantime, consider speaking with an experienced legal professional if you have any questions or concerns relating to tax debt.