There’s no getting away from the fact that for some people, the possibility of tax debt is huge. This process will walk you through all your options for setting up a plan with the IRS if paying one’s taxes in a single lump sum is going to prove difficult. The IRS offers two major types of payment plans: short-term and long-term.
- Short-term payment plans: A taxpayer having less than $100,000 combined in taxes, penalties, and interest has the opportunity to avail themselves of it. You need to be able to pay the debt within 180 days. There are no setup fees for this plan, which is one of the best options where you can settle your debts quickly.
- Long-term payment plans: Also referred to as installment agreements, these are for taxpayers who owe $50,000 or less and need more than 180 days to pay off their tax debt. In this plan, you can make the payment over a period of a maximum of 72 months-six years. However, if you owe over $25,000, you will be required to make payments via automatic debit from your bank account.
Eligibility requirements
The qualification criteria to attain an IRS payment plan includes the following factors:
- Filing of all tax returns, owing less than $100,000 for a short-term plan or less than $50,000 for a long-term plan, and the ability to show, through your financial situation, that you can make the monthly payments.
- If you are considered a low-income taxpayer, meaning your adjusted gross income is at or below 250 percent of the federal poverty level, you may also have benefits like waived fees or reduced payment terms.
How to apply for an IRS payment plan
You can set up an IRS payment plan through one of the following methods:
- Online application: The IRS Online Payment Agreement tool is the fastest way. If you already have an IRS online account, then you can just log in. If not, you will have to create an ID.me account for identity verification. It usually takes about 15 minutes if you have all the necessary information at your fingertips. But please also note that the IRS Online Payment Agreement tool is currently experiencing a service outage from 1:00 – 7:00am ET on December 8, 2024. This is due to scheduled maintenance.
- By mail: If you prefer a paper application or do not qualify for online application, complete Form 9465, Installment Agreement Request, and mail it to the address in the form instructions.
- By phone: You can also call the IRS directly at 800-829-1040 to set up a payment plan. In this case, however, you may wait longer on the phone when compared to an online application.
- In-person: For those who prefer face-to-face interaction, visiting a local IRS office is another option.
Payment methods and fees
When setting up a payment plan with the IRS, consider your payment options and associated fees:
- Automatic debit payments: This method is highly recommended as it reduces the risk of missed payments. The setup fee is typically lower ($31 if applied online).
- Other ways to apply: You can also apply via credit card, debit card or money order, but the services are more expensive (up to $225 depending on the service through which you apply).
If you’re a low-income taxpayer you may be eligible to have your fee waived or later reimbursed after paying any balance.
Monitoring your payment plan
If you get a payment plan, follow its terms:
- You should pay the same amount every month. Automatic withdrawals will keep you on track
- If your financial situation changes and you can’t pay, call the IRS immediately. They may grant adjustments in your current financial situation.
- You can modify your current payment plan from the same online service you used to apply for it. Keep in mind changes made by phone may have higher fees.
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