Which IRS Payment Option is Right for You?
It's hard to pick the best IRS Payment Option for you, as they all vary so greatly. An Installment Agreement or Offer in Compromise are the most popular options when seeking an IRS Payment Option.
Installment Agreements allow a taxpayer that owes the IRS to pay back a debt by way of a set number of monthly payments. Installment Agreements are the most commonly used IRS payment technique. This is just fine by the IRS, keeping in mind how much extra money this can make them at your expense. Let's discuss the shocking truth about IRS Installment Payment Plans.
Throwing away cash making payments to the IRS every 30 days by way of an Installment Agreement may start to seem like taking two steps forward and one step back. That is because the penalties and interest on what you owe keep building up every month.
Are there any alternatives available? If there are no other choices, the Installment Plan lets you pay off what you owe over a set amount of time via payments every month. You will come to see that it is costing your well being a terrible amount in penalties and interest. Are there other alternatives?
Pay in Full
Is Paying in Full an Option? Most taxpayers are not able to pay their entire debt with one lump sum, but if you're fortunate enough that you're able to borrow from loved ones or the bank to get this thing resolved... what's the hold up? You could save a lot in penalty fees and interest by paying what you owe all at once.
Use a Credit Card
If the interest rate on your credit card is drastically less than IRS debt payments, and your credit card limit can handle it, use your credit card to pay the IRS debt. It will be easier to manage payments with MasterCard, American Express, Discover, Visa, etc. than with www.IRS.gov. Unlike the IRS, your credit card companies are unlikely to levy your property or issue a tax lien. You should know, if you pay in full with your credit cards, the IRS will see the amount of money you saved as "income." A dirty game, but they do it.
Offer in Compromise (OIC)
Only a handful of tax debtors will qualify for an Offer in Compromise (OIC). However, you up your chances to be eligible for an Offer if any of the below 3 bullets be met.
- Can't Pay. If you can not satisfy your IRS tax debt in full before the 10 year statute of limitations is over, you could qualify for an Offer in Compromise (OIC). The IRS will review your ability to pay, even taking factors such as heath and age into consideration.
- Doubt as to Liability. You may qualify if you're not accountable for the IRS debt. You must be able to prove that you're not accountable for the tax debt assessed.
- Economic Hardship. You will be considered for an Offer in Compromise if a unpreventable disaster is stopping you from going to work (ex: handicapped, disability, etc.).
More on Eligibility for an OIC
The Offer agreement will decrease the amount you owe to the IRS, which will save you money. This also resolves the tax debt altogether.
Currently Not Collectible (CNC)
The IRS may give you a temporary or permanent release from collection proceedings, depending on how bad your hardship situation is. If you can't pay, you cannot pay.
Looking for a Consultation
By now, you've learned that when you need to repay your debt, an Installment Agreement isn't your sole option. If it doesn't work, consider consulting with a tax expert to see if any of the above options are right for you.