Taxpayers are encouraged to file a tax return even if they are not able to pay the full amount of tax owed. Individuals owing less that $25,000 may enter into a streamlined payment plan with the IRS online or by filing Form 9465. For taxpayers owing more than $25,000, financial disclosure is required via Form 433F. The IRS generally suspends collection efforts while an installment agreement is in effect or being considered.
Tax Tip – Because penalties and interest continue to accrue on installment agreements, it is often more financially advantageous for the taxpayer to borrow money from a third party and attempt to pay as much of the liability as possible.