IRS Installment AgreementTax Debt Relief

The Pros and Cons of IRS Installment Agreements

By May 24, 2018 No Comments
pros cons irs installment agreement

Some tax debtors lack the resources to pay all of the taxes they owe at the time of filing. For those who fail to pay on time, the IRS assesses heavy fees and penalties and, if the balance goes unpaid for long enough, the debtor can face having his or her assets seized and sold.

To give debtors an alternative to lump-sum payments of tax debt, the IRS allows eligible individuals to enroll in an installment agreement. Breaking down the taxes owed into smaller monthly payments reduces the financial burden on the taxpayer and helps them avoid serious penalties for non-payment.

By taking a closer look at the advantages and disadvantages of an IRS installment agreement with an experienced tax specialist, you can decide if an agreement is right for you.

Advantages of an IRS installment agreement.

Installment agreements, although not perfect, can have many advantages. The biggest advantage of an IRS installment agreement is that it gives debtors the freedom to choose their own monthly payment amount and allows up to 72 months to pay the balance in full. Having a customizable repayment plan allows the debtor to arrange for affordable payments, reducing the financial burden of owing taxes and increasing the chances that the debtor can successfully fulfill the agreement. The penalties under an installment agreement are also less, which saves the debtor money.

As an added bonus, the debtor can choose to pay the balance in full once it becomes more manageable, without incurring additional fees or penalties. And, if that wasn’t enough, entering into an installment agreement causes the IRS’ 10-year collection statute to start tolling; after 10 years, the IRS can no longer attempt to recover the debt.

Disadvantages of an IRS installment agreement.

Although an installment agreement can be an attractive option for those unable to pay their tax debt all at once, there are also some drawbacks. First, while the debtor still owes a balance, interest, and penalties will continue to increase the original amount of the debt owed; in some cases, the debtor may end up paying significantly more than the original tax debt amount. There are also enrollment fees for using an installment agreement, ranging from $43 to $225. An installment agreement also does not stop the IRS from filing a federal tax lien, which allows the government to seize your assets and sell them to pay off your outstanding debt.

Avoid IRS non-payment penalties with an IRS payment plan.

If you owe a significant amount of tax debt that you are unable to pay in full, contact the tax debt resolution specialists at Key Tax Group for more information on how an IRS installment agreement can make your debt more manageable. We offer free consultations with our tax law experts.