IRS Payment Plans You Should Know

If you owe the IRS a chunk of change, don’t fret – you have options. The IRS will work with your financial situation and needs, depending on your circumstances. You will likely be granted an extended period of time to pay your income taxes, but you will likely also owe penalties and interest for paying late. However, there is no cost if you can pay within 120 days. After that, the IRS will charge $52 for setting up a direct debit agreements, or $105 for a standard or payroll deduction agreement. If you are a lower-income taxpayer, this may be reduced to $43. As far as your minimum payment goes, this depends on how much you owe. The IRS will ask what you can afford to pay. They will then suggest that you pay the amount you owe divided by 72. Again, this will all depend on your circumstances. Read on to understand your repayment plan options.

Online Payment Plan Agreement

An online payment plan agreement is available for individuals that owe less than $50,000 and businesses that owe less than $25,000. If you’re ineligible, you can still pay in installments
using Form 9465 and Form 433-F.

Pay in Installments

If you owe under $10,000, there is no minimum payment if you pay off in three years or less. You are guaranteed approval of this payment plan.

If you owe $10,000 to $25,000, there is no guarantee that you will be granted a payment plan, but you do not have to provide additional information to apply. You will have 72 months to pay the amount you owe.

If you owe $25,000 to 50,000, additional information is required to evaluate if a payment plan is possible. You will have to report your income and expenses on Form 9465-FS. The minimum payment due each month will be the amount you owe divided by 72, as above.

If you owe $50,000 or more, the IRS will conduct a thorough financial background check via Form 433-A. You will have a unique minimum payment depending on the amount you owe and your circumstances. It is often wise to sell assets to pay down your taxes.

Your tax refunds will be applied to your tax debt until it is paid off.
You need to pay the minimum amount each month, on time for your payment plan to continue.
Include all necessary information such as your social security number, and especially an updated mailing address.

Other Options

If the amount you owe is in between a few thousand and $10,000, but you are in circumstances in which you cannot pay on time, consider:

Offer in Compromise

This settlement allows you to pay less than you actually owe. Apply by filling out a 656-B.

Temporary Delay

As it sounds, this option gives you an extended period of time to pay, but is not the same as an installment plan. Your taxes are deemed not collectible until your financial situation improves. Proof of financial status is required, and filling out a form in the 433 series, called a Collection Information Statement.

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