If you are in the position of being unable to pay all of your required taxes in a timely manner, you can avoid liens and other penalties by setting up an installment agreement with the Internal Revenue Service (IRS) to make monthly payments. This is called an IRS Installment Agreement, since you are agreeing with the IRS to pay off your outstanding tax debt little by little, via monthly installment payments. This will enable you to reduce or eliminate altogether the amount of penalties and interest that the IRS would otherwise require you to pay.
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However, there are certain steps which you must take in advance in order to be eligible to set up an IRS Installment Agreement. These steps include:
- You must file all of your outstanding tax returns. (See IRS Compliance service)
- You must consider all other sources of income (such as obtaining a loan, or using your credit card) to pay your tax debt off in full.
- You must determine the largest monthly amount that you can pay until your debt is fully satisfied (the minimum is $25 per month).
- You must agree that all of your future tax refunds will be applied to your tax debt until it is fully paid off.
There are other terms and conditions which may apply. Contact a qualified tax attorney for further information and assistance.