How do you set up a payment plan with the IRS?

July 08, 2022 by Steve Banner, EA, MBA
Woman reading document

I’m sure that almost nobody likes to find themselves in a position where they have a tax debt that they can’t pay immediately, and thus they have to ask this question. Although the IRS would prefer that individuals pay what they owe promptly and in full, the agency also understands that this is often not possible. For that very reason, the IRS offers a series of payment plan options for those individuals and businesses who need more time to pay. In this article, we will focus our attention on payment plans for individuals.

In an earlier article on this site, we talked about the types of payment plans that the IRS offers for individual taxpayers. Just to recap, you can apply for a short-term plan if you believe you will be able to pay off your debt within 6 months; or you can apply for a long-term plan if you will need between 6 and 72 months of monthly installments to resolve your debt. Exactly which payment options are available to you will depend on your specific tax situation, but bear in mind that interest and penalties will be added to your remaining balance until the debt is paid in full. In other words, the sooner you can pay off your debt, the less you will need to pay.

After your payment plan has been approved by the IRS, you can make payments directly from your checking or savings account, by check, or by money order. You can also use your debit/credit card, but this method is subject to additional fees. Depending on the amount of your tax debt, your application to set up a payment plan may be made online, by phone, by mail, or in person.
 

Online
You may qualify to apply online as follows:

  • Short-term payment plan – if you owe less than $100,000 in total tax, penalties and interest.
  • Long-term payment plan – if you owe $50,000 or less in total tax, penalties and interest and you have filed all current and prior required tax returns.
 

Phone
You may apply for a payment plan by calling the IRS at 1-800-829-1040.

Mail
You may apply for a long-term payment plan by completing and submitting IRS Form 9465, Installment Agreement Request.



Regardless of which of the above methods you may use, the IRS may impose some conditions on the payment plan that it approves in your case. For example, if you have applied for a long-term payment plan to address your tax debt of $25,000 or greater, the IRS will require that all monthly payments are made automatically by direct debit. And if your debt is $50,000 or greater, the IRS will seek to gather further information about your fiscal situation by requesting the completion of Form 433-F, Collection Information Statement. This form is designed to obtain current financial information necessary for determining how an individual taxpayer can satisfy an outstanding tax liability.

As we have seen, the IRS offers several pathways for individual taxpayers to pay down their tax debt. But as can be imagined, navigating these pathways without help can be quite tricky depending on your specific tax situation. But you don’t have to do it on your own because you can contact TaxAudit and speak to an experienced tax professional for a cost-free, obligation-free assessment of your case. For a more detailed look into payment plans, please visit our website. Our experienced tax professionals will help you figure out the best IRS tax debt settlement option for your situation.

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Steve Banner, EA, MBA
Tax Content Developer

 

Steve Banner began his career in the field of income tax in 1977 and has since gathered business experience in a variety of countries and cultures. In addition to the United States, he has lived and worked for extended periods in Australia, Saudi Arabia, Canada, and Sweden. Along the way he studied Adult Education and earned a Bachelor of Education, Master of Educational Administration, and MBA. He joined TaxAudit in 2016, where he is a Tax Content Developer.


 

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