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4 things you must know about IRS tax payment plans

You don't have enough money to pay off all of your tax debt at once. You're thinking about a potential payment plan, which would allow you to take care of it over time.

As you move forward, here are four critical things you need to know:

1. The plan is not free.

The plan, which the IRS calls an installment agreement, does come with a fee from the agency. It may still be the right move financially, but don't assume you'll pay nothing to get started.

2. Many people are guaranteed acceptance.

To be guaranteed the payment plan you want, certain criteria must be met. For instance, you need to owe less than $10,000, to have paid off your taxes on time for the past five years and you must have filed proper income tax returns.

3. You must not be able to pay it all at once.

The IRS will look into your financial situation to see if you can pay the full debt or not. Payment plans are supposed to be used by those who want to pay their taxes and lack the financial means to do so, not by people who just want to spread tax debt out over a few years.

4. Most plans are under 10 years long.

Typically, the IRS isn't allowed to keep collecting taxes for more than a decade. Therefore, the maximum length of the payment plan is usually under 10 years.

If you think that a payment plan is right for you, make sure you understand your legal rights, your obligations, and what must be done to officially set up that plan.

Source: TurboTax, "Facts About IRS Payment Plans," accessed Aug. 22, 2017

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