Factors of Installment Payment Amounts

What determines your tax installment payment amount? Several factors come to mind. Since every person has a unique financial situation, their tax payment terms are also unique. Lucky for all of us, the government doesn’t require a flat monthly amount for its installment agreements. Here is a look at some of the determinants for installment payments.

  • Current earnings: The more money you make, the more you will have to pay each month. At least, that’s the basic theory. If your current income is high and stable, you probably won’t get away with $20 monthly payments.
  • Current debts: The IRS will consider your bills and other debts to see how much disposable income you could reasonably pay towards your taxes. In essence, they will calculate a debt to income ratio and go from there.
  • Seasonal earnings: If you happen to earn more money during certain parts of the year than others, it factor into your overall payment plan. You won’t be required to pay more at that time. You’ll just have to pay more on average.

Talk to a tax professional about the installments you think you can afford, and he or she will work out the most reasonable plan for your current financial situation.