IRS Installment Agreements
If you cannot pay the taxes you owe to the Internal Revenue Service, the IRS might initiate a levy action or file a federal tax lien. To avoid the collection process by the IRS, you can request a payment plan for the taxes you owe. A payment plan allows you to pay your taxes over an extended period. By arranging for monthly payments, you can avoid the negative aspects of an IRS collection action.
Remember, applying for an installment agreement does not extend the time you have to file your tax returns. You are still expected to file your tax return and pay the taxes you owe by the due date. Therefore, if you plan to request an installment plan, you need to make sure that you file your tax return on time and file your application for an installment agreement promptly.
Types of installment agreements for paying the Internal Revenue Service
The IRS offers a short-term repayment plan and a long-term repayment plan.
• Short-term payment plans — This plan allows 120 days or less to pay the taxes you owe to the IRS. As of January 1, 2017, there was no setup fee charged for short-term payment plans. The IRS will accept payments for short-term plans by checks, debit cards, credit cards, money orders or an automatic draft. A processing fee will be charged when you pay by debit or credit card.
• Long-term payment plans without direct debit — If you want to pay your taxes in installments that exceed 120 days by a means other than direct debit, you will incur a setup fee of $149 ($43 for low income individuals) if we apply online and a $225 setup fee ($43 for low-income individuals) if we apply in person, by phone or by mail. The fees were set as of January 1, 2017, but are subject to change. As with the short-term plan that is paid by card, a processing fee will be added to the amount of your installment payment.
• Long-term payment plans with direct debit — Long-term plans over 120 days paid by automatic drafts from your checking account have lower setup fees. If we apply online, your fee is $31. When we apply by mail, in person, or by phone, the fee is $107 ($43 for low-income individuals).
In all plans, interest on the amount you owe continues to accrue until the entire balance is paid in full. In addition, if you owe more than $25,000, you must use the direct debit option for your repayment plan. If you already have an installment agreement for taxes, we can apply online to modify or restructure your existing plan. We may also apply online to reinstate a plan that you have allowed to lapse. The fee for these applications is $89 ($43 for low-income individuals).
Applying for an installment agreement with the Internal Revenue Service
In some cases, we may not be eligible to submit your application for an installment agreement online. For example, individuals who owe more than $50,000 are not eligible to apply online for a long-term payment plan. Even if you owe less than $50,000, if you have not filed all required tax returns, you are not eligible for an online installment agreement. If you are applying for a short-term payment plan, you must owe less than $100,000 in tax, penalties and interest to apply online.
Remember, even if you are not eligible for an online IRS installment agreement, you might still be eligible in other forms. We can complete and mail IRS Form 9465 (Installment Agreement Request).
Benefits of paying on time
Obviously, there are benefits to paying your IRS taxes by the due date. You avoid setup fees and interest accruing on the balance that you owe. In addition, you can avoid the offset of any tax refunds you might be owed on future tax returns. Lastly, you avoid any issues that you might encounter when applying for an IRS installment agreement.
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