Sometimes taxpayers cannot pay what they owe in full, but remember the IRS has numerous payment plan options available.
The IRS offers several different payment plan options, but taxpayers may want to first consider non-IRS options depending on their financial situation. Regardless of how someone pays, they should act quickly because tax bills get larger as long as they remain unpaid.
Online self-service payment plans
Most taxpayers qualify for an IRS payment plan (or installment agreement) and can use the Online Payment Agreement (OPA) to set it up to pay off an outstanding balance over time. Once taxpayers complete the online application, they receive immediate notification of whether the IRS has approved their payment plan.
The process only takes a few minutes, and there’s no paperwork and no need to call, write or visit the IRS. Setup fees may apply for some types of plans. Taxpayers who don’t qualify for online self-service should contact the IRS for other payment plan options using the phone number or address on their most recent notice.
Individual taxpayers’ online payment plan options include:
Short-term payment plans – For taxpayers who have a total balance of less than $100,000 in combined tax, penalties, and interest. This plan gives them an extra 180 days to pay the balance in full.
Long-term payment plan (an installment agreement) – For taxpayers with a total balance of less than $50,000 in combined tax, penalties, and interest. They can make monthly payments for up to 72 months. Taxpayers are encouraged to set up plan payments using direct debit (automatic bank withdrawal), which eliminates the need to send a payment each month, saves postage costs, and reduces the chance of default. The IRS requires direct debit for balances between $25,000 and $50,000.
Business taxpayers’ online payment plan options include:
Long-term payment plan (an installment agreement) – For business taxpayers with a total balance of less than $25,000 in combined tax, penalties, and interest from the current and preceding tax year. They can make monthly payments for up to 24 months. Taxpayers can choose to set up payments using direct debit (automatic bank withdrawal) which requires it on balances between $10,000 and $25,000.
Online tools for payment plans
Qualified taxpayers with existing payment plans may be able to use the Online Payment Agreement to make changes to their plans that include revising payment dates, payment amounts, or bank information for direct debit payments.
Individual taxpayers have the option to sign into or create their own Online Account. This account allows them to:
Check on any scheduled or pending payments.
Review payment plan details and payment history.
View the amount they owe.
Payment options for taxpayers already working with the IRS
Individuals and out-of-business sole proprietors who are already working with the IRS to resolve a tax issue, and who owe $250,000 or less, have the option to propose a monthly payment that will pay the balance over the length of the collection statute – usually 10 years. These payment plans don’t require a financial statement, but a determination for filing a notice of federal tax lien still applies.
Find more information about the costs of payment plans on IRS.gov – Additional Information on Payment Plans.
Any opinions are those of Snow Financial Group and not necessarily those of Raymond James. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.