The Advantages (and Disadvantages) of IRS Installment Agreements

Do you owe back taxes to the IRS?

If so, you’re not alone. According to a recent report, an estimated 1 in 5 people who file returns for 2019 expect to owe the IRS and last year 24% of the people who filed tax returns owed money to the IRS.

Taxpayers who are unable to pay all the taxes they owe at the time of filing can be in for some nasty surprises. Unpaid taxes can come with big problems including wage garnishments and the seizure and sale of your assets.

But what happens when you owe the IRS money and can’t afford to pay it all at once?

For tax debtors who can’t pay the full amount of taxes they owe in a lump-sum, the IRS allows eligible individuals to enroll in a monthly payment plan, known as an IRS installment agreement. These plans help taxpayers pay back their tax debt a little at a time, while avoiding the serious penalties that come with non-payment.

Let’s take a closer look at the advantages and disadvantages of IRS installment agreements below. And remember, if you are struggling with tax-related issues the experienced Seattle tax legal team at Boeshaar Law can help you avoid the heavy fines and penalties that can result from an unresolved tax dispute.

Advantages of an IRS installment agreement

An IRS installment agreement can provide debt relief and save taxpayers money. The benefits of an IRS installment agreement are:

  • Choose your monthly payment amount
  • Up to 72 or 84 months to repay your balance depending on the amount owed
  • Smaller penalties
  • Can choose to pay the balance in full without additional fees or penalties
  • Does not extend the 10-year statute of limitation for the IRS to collect from you

The biggest advantage of an IRS installment plan is that it puts you in control of how much money you pay each month and gives you extra time (up to 84 months) to pay your balance in full. Having the option of a customizable payment plan, rather than a set billed monthly amount that may exceed what you are able to afford, increases the odds of paying your debt off and relieves some of the stress that comes with owing money to the IRS.

Also, you can opt to pay the balance in full at any time without incurring additional fees or penalties. As an added bonus, the IRS only has 10 years to recover payment from you. During the time that you are paying the IRS under an installment agreement the clock continues to run on the time the IRS has to collect the tax. Also, certain penalties are reduced once you start an installment agreement.

Disadvantages of an IRS installment agreement

While a great option for saving money and making tax repayment less burdensome, IRS payment plans do have some drawbacks. For instance:

  • Interest and penalties will continue to accumulate while you are paying your bill
  • You must pay enrollment fees before starting your payment plan
  • It does not offer protection from federal tax liens

One of the biggest disadvantages of an installment agreement is that, because interest and penalties will continue to accumulate during the repayment period, some tax debtors will end up paying significantly more than the original tax debt amount. This is also true because entering into an installment agreement requires the payment of an enrollment fee, which can cost up to $225.

Another disadvantage of an installment agreement is that it doesn’t prevent the IRS from filing a federal tax lien (which gives them rights to the proceeds if you sell your property).

Help for Seattle taxpayers who have unpaid tax debt

More information about IRS installment agreements can be found on the IRS webpage.

If you would like to discuss IRS installment agreements and other tax solutions that work for your family, please contact the experienced tax legal professionals at The Law Offices of Robert V. Boeshaar. Our Seattle, Washington office offers free initial consultations over the phone. Don’t risk racking up huge IRS fines for unpaid tax debt: contact our Seattle tax attorneys today!

Written by Robert V. Boeshaar

Robert V. Boeshaar

Robert V. Boeshaar is a Seattle tax attorney committed to helping individuals and small businesses who are facing problems with the IRS. He believes in using his experience to serve others and to make a difference in their lives.