Which tax payment plan is right for me?Published:
There aren’t really separate plan options for you to choose from when setting up a tax payment plan. However, you do have different options when you want to choose how much you can pay back and when. First, let’s take a quick look at the program and how it can work for you when you find yourself owing taxes.
Overview of the IRS Tax Payment Plan
Basically, the tax payment plan lets you pay due taxes to the IRS in installments. If you owe way too much money or just don’t have the money right now, it can help you get your life back on track.
The IRS charges interest on these taxes due. Generally, this is somewhere between 5% and 10%. Interest is not charged for taxes due if you pay your taxes before the end of the tax season.
Options for Paying Taxes Owed
Now that being said, you have a few options when it comes to your tax payment plan. One of the first things to consider is how much you can pay each month. The interest that accrues on your account is dependent on the full year. So, the quicker you pay, the less interest grows.
Another option to consider is how quickly you can pay the taxes off. If you can finish paying them in 120 days or less, then you won’t gather any interest on your account. This can lower your costs dramatically, especially when compared to other, steeper financial options like paying with a high-interest credit card.
One of the most important things to remember is to not tell the IRS you can pay more than you actually can. It is very important to pay as much as possible. However, if you mislead the IRS and then cannot pay on your tax payment plan, then you can be hit with heavy fines or other penalties.