Pay plans are typically used to satisfy obligations in which the taxpayer cannot satisfy the total obligation with one lump payment. Payments received are used to satisfy tax, penalty, and interest. Pay plans are typically negotiated between the tax authority and taxpayer. The negotiated payment amount and specific date intervals of the pay plan include such factors as total obligation amount and the taxpayer's ability to pay. Examples in which a payment plan should be used include:
After an audit of income, it is determined that the taxpayer incorrectly calculated their tax and owes additional tax to the tax authority. If they do not have enough money to satisfy the obligation at the time of the audit decision, they can arrange a series of payments to the tax authority to satisfy their obligation.
Property values rose by an unexpected rate. This increased property bills and if a taxpayer could not pay the tax bill on the new assessed value of their house they could set up a pay plan to pay off the amount they owe over a six-month period.
Pay plans can cover one or more obligations linked to any account of the taxpayer. You can have multiple active pay plans for an account, but any given obligation can only be covered by a single pay plan at any point in time.
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