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Installment Agreement for Repaying Back Taxes

September 18th

Many people faced with huge mountains of back taxes are seeking solutions. Most are just ordinary citizens who have found themselves saddled with a burden they cannot afford to pay back; most are looking for a way to compromise and get out of their debt. Many people see offers on television claiming to settle back taxes for pennies on the dollar, an enticing prospect. Retaining the services of a tax debt lawyer is the best first step toward eliminating your debt due to back taxes.

Installment Agreement vs. Offer in Compromise

The television ads are referring to a repayment scheme for back taxes called the offer in compromise. The offer in compromise is a negotiation strategy where a tax debt lawyer presents a repayment plan to the IRS, usually a lump sum payment at a reduced amount. This strategy can work, but has many limitations, and rarely results in the ‘pennies on the dollar’ amount advertised.

Alternatively, offering an installment arrangement to the IRS can still result in a reduced payment for your back taxes over time, and is more likely to be accepted than the offer in compromise. An installment agreement is a renegotiated payment plan which stops the IRS from pursuing you as a noncompliant account, while reducing the principal owed and showing good faith. The principal will continue to accrue interest during repayment, so this is an option for those who can afford to make payments that cover the interest and part of the principal.

A tax debt lawyer will help you determine how best to approach your IRS debt and pay off your back taxes.

 
 
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