Do you owe the IRS back taxes? In this case, you need to pay them as soon as humanly possible. That being said, you need to ask yourself this question: can I afford to pay the IRS all the money I owe at once? If you can send a lump payment you should do so. This will get you out of hot water with the IRS, and allow you to forget about your situation. If this does not work for you, there are other options although they may not be nearly as intriguing.
Using an installation agreement is something you should not overlook. The nice thing about this option offered by the IRS is that you will not be liable for paying your entitlement tax liability all at once. For example, if you owe $ 20k you can pay month by month until the entire debt is wiped out. This is perfect for people who owe back taxes, but do not have the money in cash to pay all at once.
Why would an installment agreement be a bad idea? For one, you will also have to pay interest and penalties to the IRS. In other words, not only are you paying back taxes, which you legitimately owe, but you are also going to get hit with other fees that will increase the total out of pocket amount. Even though you have to pay more, if this is your only option it is why you need to do.
Once you know how much money you owe the IRS you can then decide if paying via an installment agreement is the best option. If you compare this to paying in full you will be able to clear see which one will work best.
An installation agreement can be beneficial. Now that you know when you can use this option it may come in handy in the future.