Options for Paying Back Taxes to the IRS
Options for Paying Back Taxes to the IRS
Not everyone receives a tax refund, and owing money to the IRS can be a challenging situation. If you find yourself unable to pay your tax debt immediately, it's crucial to explore the available payment options to avoid penalties and wage garnishment.
1. Short-term payment plan
- Fee: No setup fee, but accrued interest and penalties apply
- Interest Rate: 4% per year compounded daily
- Penalty: 0.5% of unpaid tax debt per month
2. Long-term payment plan
If your tax bill is not payable in 180 days, you can apply for an installment agreement with varying setup fees based on payment method and income level.
3. Offer in compromise
This option allows you to settle your tax debt for less than the total owed, but approval is challenging. You must prove financial hardship or inability to pay to qualify.
By working with the IRS to establish a payment plan and meeting your obligations, you can manage your tax debt effectively while avoiding severe consequences.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.