Simply postponing payments until a later date when you may have the means to pay may not be a good option.

There’s interest and late payment penalties adding up too. You may also have penalties for failure to file your tax returns on time.

Since the IRS, as well as states authorities, are interested in getting their money, they have come up with payment options to better accommodate tax debtors. Whether you call it an installment agreement, payment agreement, payment options or a payment plan, the idea is the same, you make payments on the taxes you owe.

First of all you need to make sure you file all your back tax returns. As you certainly know by now, the IRS has three years to give you a refund, three years to audit your tax return, and ten years to collect any tax due (these rules are called the statute of limitations). The IRS will not approve a payment agreement if you have not yet filed all your tax returns.

One of the options is to ask for additional time to pay. Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at http:www.IRS.gov or by calling 800-829-1040. If you are granted an additional 60 to 120 days to pay the tax in full, you generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

You can apply for an IRS installment agreement using the Web-based Online Payment Agreement (OPA) application on IRS.gov. The Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval.

You may also complete and submit a Form 9465, Installment Agreement Request, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan.

There are four basic types of installment agreements:

• 1. Guaranteed Installment Agreements are for taxpayers who owe $10,000 or less, haven’t filed late or paid late in the previous five years, and agree to pay on time for future years. You are not required to fill out a financial statement (Form 433-F) and the IRS will not file a federal tax lien (which are reported to the credit bureaus). The monthly installment payments will pay off in 36 months or less.
  

• 4. With the Non-Streamlined Installment Agreement you need to negotiate an installment agreement with the IRS if your balance due is over $25,000, or you need a repayment term longer than five years.
  

You should also know that the IRS charges a user fee to set up your installment agreement, which is usually $105 or $52 if payments are deducted directly from your bank account. There is also a user fee of $45 for reinstating or restructuring existing agreements.

Another option for paying your tax liability is by using your Credit Card or Debit Card.

As mentioned before, States are also willing to set up installment agreements to help you pay the tax balance due.

Once an installment agreement is reached, a lien determination will be made, and a lien may be filed. State and federal refunds are subject to interception and will be applied to any outstanding tax liabilities. All payment agreements are subject to periodic re-evaluation.

With the Virginia Department of Taxation, once you receive a bill for the tax balance due, you can contact the Teleplan service at (804) 440-5100, or a Service Representative at (804) 367-8031 to set up an installment payment plan.

If the Department of Taxation accepts the terms of your payment plan (monthly or semi-monthly) you must pay the balance due and timely file and pay all future returns.

As far as the Comptroller of Maryland is concerned, when your return is processed, a Personal Income Tax Balance Due Notice will be sent to you, with a convenient check-off for payment options.

If you are unable to pay the notice in full at that time, you can contact the Collection Section at 410-974-2432 or 1-888-674-0016 to request a payment arrangement. If you prefer, you may set up payments online.

When confronted by the IRS or the states authorities to pay back a debt that you owe, you must remember that there are options and that the deadline they give you to pay back the money is not necessarily set in stone.

Remember, all these programs are available to you without the assistance of a professional but it is our advice to contact a reputable tax professional who may be able to negotiate a better payment plan with the authorities in question and give you other specialized tools to enable you to see the light at the end of your “financial tunnel” again.