IRS installment and full payment agreements

In 2020, the Internal Revenue Service provided all taxpayers with an additional three months to file their tax returns without the need to request an extension. However, as normal, the IRS did expect payment of any outstanding tax liability to accompany the filing of the tax return.

When a person owes income taxes but cannot make payments on time, the IRS does provide a few different options. Some people may know about the Offer in Compromise but a taxpayer may also choose to utilize the full payment or the installment payment options.

Full payment of taxes within 120 days

If a person believes they can successfully pay all outstanding taxes within 120 days from the tax return deadline, they may request a full payment agreement. If granted, this agreement essentially provides them with a 120-day grace period to clear their tax debt. The taxpayer should know that their bill will be larger if they exercise this option as penalties and interests do amass on any outstanding balance during this time. However, there is no fee associated with participation in this program.

Longer-term installment payments

If a person needs more than 120 days to clear their full tax debt, they may request a fixed installment payment agreement. As with the full payment plan, penalties and interest will be assessed on the outstanding balance for the duration of the agreement. The installment payment agreement also requires the payment of a fee to participate in the program.

More information about the various programs via which a person may satisfy an outstanding federal income tax bill may be found on the Internal Revenue Service payment options page of our Texas tax law website.