Payment plans are the thing most clients are trying to avoid, which often means paying the IRS back in full. In every case we always will look first to see if you qualify for an Offer In Compromise. However, even if you do not qualify for an Offer, handling your own payment plan request with the IRS, especially if you owe over $50,000, can be difficult and result in a much higher payment per month than if handled by a professional. States can even be more difficult with any amount of debt, particularly California, Colorado, New York, and New Jersey.
Do I always pay in full with a payment plan?
Not necessarily. There are a few ways to still save money while in a payment plan with the IRS. The first part is a penalty abatement, where the IRS forgives the penalties that were assessed. Interest by itself is not abated, but interest that accrued on the penalties can be abated. Penalty abatements for most years will require “reasonable cause” to be abated. Pretty much, this means you have to have a good reason. Divorce, death in the family, illness, these are all good reasons. For the first year that you owe, you may be eligible for a first time penalty abatement based on prior compliance.
The second way to save money on a payment plan is with a partial pay installment agreement. This is when the tax balance is so large in compared to the amount the IRS can require you to pay, that you just pay monthly payments until the debt expires. This results in huge savings at times and often is the best way to go when the you have other assets that will not allow you to get an Offer In Compromise.
A payment plan is not always the worst thing, it is definitely better than being garnished and levied.