As an incentive, IRS reduces the late payment penalty to 0.25% per month if you enter into an installment payment plan.

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But every compliant taxpayer is entitled to an installment agreement from the IRS. The amount of the installment payment is what the taxpayer is able to pay.

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But the IRS does offer an installment payment plan and an "offer-in-compromise" program for folks who can show they can't pay all they owe, even over time ( see box).

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To use the annualized income installment method, you complete a worksheet at the end of each payment period and figure the payment due.

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