Quick Answer:
If you can’t pay your IRS back taxes in full, you may qualify for an IRS payment plan. Options include short-term extensions, long-term installment agreements, or partial payment plans. Choosing the right one can help you avoid aggressive collections, reduce stress, and regain financial control.

Why IRS Payment Plans Exist

The IRS knows that many taxpayers can’t pay their entire tax bill immediately. Rather than forcing bankruptcy or chasing endless collections, they offer structured repayment programs. These programs allow you to pay over time while keeping penalties and interest manageable. But not all plans are created equal — and choosing the wrong one could cost you thousands.

Types of IRS Payment Plans

1. Short-Term Payment Extension (120 Days or Less)

  • Who qualifies: Taxpayers who can pay the full balance within four months.

  • Pros: No setup fee, keeps you compliant.

  • Cons: Penalties and interest continue until the balance is cleared.

2. Long-Term Installment Agreement (Over 120 Days)

  • Who qualifies: Individuals who owe less than $50,000 or businesses that owe under $25,000.

  • Pros: Predictable monthly payments, stops levies/garnishments if you stay current.

  • Cons: Setup fee applies, and interest/penalties still accrue.

3. Partial Payment Installment Agreement (PPIA)

  • Who qualifies: Taxpayers who can’t afford to fully repay within the statute of limitations.

  • Pros: Allows smaller monthly payments based on your budget.

  • Cons: IRS will review your finances regularly and may demand higher payments if your income rises.

4. Offer in Compromise (OIC) Alternative

Although technically not a “payment plan,” the OIC lets you settle your debt for less than you owe. If approved, you pay either a lump sum or periodic installments, and the IRS forgives the remaining balance.

Pros of IRS Payment Plans

  • Stop wage garnishments, bank levies, and collection actions.

  • Lower stress and give you time to catch up.

  • Keep you in good standing with the IRS.

Cons of IRS Payment Plans

  • Accrued interest and penalties can make the debt larger over time.

  • Missing a payment may default your plan and restart IRS collections.

  • Requires disclosure of income and assets for eligibility.

Common Mistakes to Avoid

  1. Waiting too long — interest and penalties stack up daily.

  2. Agreeing to payments you can’t afford — leading to default.

  3. Not exploring alternatives like an OIC when eligible.

  4. DIY approach — negotiating directly with the IRS without understanding the rules.

How Polaris Tax & Accounting Helps

At Polaris Tax & Accounting, we don’t just “set up a plan.” We:

  • Review your financial situation to determine the best strategy.

  • Handle IRS negotiations on your behalf to secure manageable terms.

  • Protect you from IRS enforcement actions while your plan is processed.

  • Explore alternatives like OIC or penalty abatements when appropriate.

👉 Whether you owe a few thousand or six figures, our licensed Enrolled Agents have the expertise to defend your finances and help you regain peace of mind.

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💡 Don’t wait until the IRS freezes your bank account. Schedule a consultation with Polaris Tax & Accounting today and let us help you find the best payment plan for your situation.