What Is a Payment Arrangement?
Payment arrangements are used to pay off tax in a monthly payment. Payment arrangements are chosen when you earn enough money to pay off the tax over time, but you don’t have enough to pay the tax in full right now.
The type of payment arrangement chosen will be determined by the total amount of tax that you owe. We may have to coordinate the federal tax payment with a state tax payment arrangement.
Can I Make a Payment Arrangement Myself?
We will always recommend that you stay current with this year’s taxes first, and then pay the back tax.
If you need a payment arrangement for a relatively small amount of tax, you may be able to do your own talking. But it is very important that you stay current with this year’s tax while paying off any past due amount. So when you do your own arrangement, be sure to allow for any estimated taxes that you will pay this year.
As professionals, we will always recommend that you stay current with this year’s taxes first, and then pay the back tax. In this way and in the long term you minimize the penalties and interest you may pay. You must also be current on this year’s tax to be able to qualify for an offer in compromise or other preferential treatments.