Owing the IRS is never a pleasant situation, but it can be even more taxing when you can’t pay your bill in full. If you don’t pay your balance by the original filing due date, any amount not paid is subject to interest and a monthly late payment penalty. Continued non-payment can also lead to bank levies, liens, wage garnishment, and tax refund offset. An IRS payment plan, however, can protect you from certain collection actions and give you more time to pay off your tax debt. To learn how to set up a payment plan with the IRS and which type is best for you, keep reading.
Types of IRS Payment Plans & Fees
There are several types of payment plans available. Which one you choose will depend on the amount you owe and how quickly you expect to pay it off. Your monthly payment and setup fees will also vary by plan.
Short-Term Payment Plan
Short-term payment plans are only for individual taxpayers who can pay their balances in full within 180 days or less.
Setup Fee(s): $0
Other Fees: There is a small processing fee if you make your payment by debit or credit card.
Minimum Monthly Payment: None
Long-Term Payment Plan
If you’re unable to pay your balance in 180 days, a long-term payment plan may be a better option. Your tax balance must also be $50,000 or less. Low-income taxpayers may qualify for reduced setup fees or a fee waiver. A federal tax lien may also be filed against your property.
Setup Fee(s): Direct Debit is $31 for online application or $107 for phone, mail, or in-person. All other payment options are charged $130 for online or $225 for phone, mail, or in-person applications.
Other Fees: There is a small processing fee if you make your payment by debit or credit card.
Minimum Monthly Payment: For balances between $10,000 and $50,000, your monthly payment should be the amount of your tax balance divided by 72. Balances over $50,000 will vary based on the length of the agreement with the IRS.
Guaranteed Installment Agreement
Is your tax bill under $10,000? You may qualify for a guaranteed installment agreement. This gives you three (3) years to pay off your balance. The IRS will generally accept this type of agreement if you’ve filed on time for the last five (5) years and paid on time, as well.
Setup Fee(s): Direct Debit is $31 for online application or $107 for phone, mail, or in-person. All other payment options are charged $130 for online or $225 for phone, mail, or in-person applications.
Other Fees: There is a small processing fee if you make your payment by debit or credit card.
Minimum Monthly Payment: The suggested minimum monthly payment is your tax debt divided by 30. This will ensure you also cover any penalties and interest fees charged until paid in full.
Partial Payment Installment Agreement
A partial payment installment agreement (PPIA) allows you to make monthly payments (based on your ability to pay) until the statute of limitations expires. Any remaining balance is then forgiven. You must owe more than $10,000 and have no unfiled returns or an active Offer in Compromise. If you’re in an open bankruptcy proceeding, you are ineligible for this type of payment plan. It’s important to note that the IRS will review your PPIA every two years. If your financial situation improves, your monthly payment will likely increase.
Setup Fee(s): Direct Debit is $107 for phone, mail, or in-person. All other payment options are charged $225 for phone, mail, or in-person applications.
Other Fees: There is a small processing fee if you make your payment by debit or credit card.
Minimum Monthly Payment: Varies based on agreement with the IRS.
How to Set Up an IRS Payment Plan
Most taxpayers can set up an IRS payment plan (short-term, long-term, or guaranteed) online. It takes just a few minutes to complete the application and get approval or rejection. Just follow these steps:
- Gather the necessary documents and information. This will include your recently filed tax return, Social Security number (SSN) or Individual Tax ID Number (ITIN), and bank information (account and routing numbers).
- Create an account with ID.me and have your photo identification ready (driver’s license, state ID, or passport).
- Go to the online payment agreement application page on IRS.gov and click the “Apply/Revise as Individual” button. Follow the instructions and pay the required setup fees (if applicable).
If you’re unable to apply online, you can also submit Form 9465, Installment Agreement Request, by mail or call 800-829-1040 to apply by phone.
Requesting a partial payment installment agreement, however, is a bit more complicated and cannot be done online. You’ll need to complete Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-F, Collection Information Statement, as well as Form 965. Additionally, you’ll need to provide financial documentation, include a letter requesting a PPIA, and pay the setup fee. You must also include your first month’s payment with the application. The IRS will typically accept or reject your PPIA request within 30 days after receipt of your application.
Should I Work With a Tax Relief Company?
For small tax balances (less than $10,000), it’s best to handle setting up a payment plan on your own. There are certain instances, however, when working with a tax relief company can be beneficial. If you owe more than $10,000 or are facing financial hardship, a tax professional can negotiate with the IRS on your behalf. They can also determine if you’re eligible for various tax relief programs that can reduce or even eliminate your tax debt. To explore your tax relief options, call Tax Defense Network at 855-476-6920 and schedule a free consultation today!
