You open your mailbox and see another tax notice waiting inside. Your stomach drops as you toss it aside, hoping the problem will sort itself out.
Does this sound familiar? Ignoring your tax debt actually brings you more harm than good. The Internal Revenue Service (IRS) can seize your wages, drain your bank account or place liens on your property if your overdue debt remains unsettled.
Fortunately, you have options. An installment agreement offers you a less stressful way to settle your tax obligations without paying it off all at once or facing harsh penalties.
What is an installment agreement?
An installment agreement is a payment plan with the IRS. It allows you to pay your tax debt over time through monthly payments. You can think of it as a paylater program, but for taxes. Thus, just like a paylater service, the IRS provides different payment plans based on how much you owe:
- Short-term payment plan: This payment plan gives you 180 days to sort out your tax obligations.
- Long-term payment plan: This payment plan lets you pay your tax debts in small monthly payments for a set period of time.
The IRS structures these payment options to match your financial situation. This flexibility helps you manage your debt without overwhelming your budget. Aside from the convenience of paying off your debt in smaller increments, installment agreements also come with other benefits to help you settle your debt faster.
Benefits of setting up an installment plan
Setting up an installment plan protects you from harsh IRS collection practices. The agency usually stops taking money from your wages and bank accounts once you start your plan. This gives you peace of mind while you settle your debt.
Additionally, the IRS also prolongs or suspends their deadline to collect what you owe. This extra time helps you pay off your balance without feeling rushed. You also get flexible payment terms for your budget, making it easier to keep up with payments.
Finally, you get reduced penalty rates when you enter into an installment agreement with the IRS. While interest keeps adding up, lower penalties mean you can pay less overall. While these benefits help you save every dollar you can to help settle your debt, the most important thing you can do is to start taking action today.
Take control of your tax debt today
Tax law is often hard to understand. But your debt won’t go away if you keep ignoring it. Don’t let tax notices keep piling up in your mailbox. With installment agreements, you can take the first step toward financial freedom.
However, if you’re still having a hard time navigating these complex tax processes, then consider reaching out to a tax professional. They guide throughout the entire process and give you the chance to move past your financial troubles today.