Now that the IRS has begun processing the backlog of filed tax returns – about 35 million of them – many taxpayers may be facing an unexpected tax bill. While the IRS is strict about tax filings and payments, IRS payment plans may be available for those who qualify.
Here we’re covering some basic information about individual IRS payment plans, including frequently asked questions about IRS payment plans and IRS installment agreements.
What Is an IRS Payment Plan?
An IRS payment plan is an agreement with the IRS for you to pay the tax you owe the IRS over an extended period if you believe that you’ll be able to honor the payment plan arrangement within the given time.
Are There Different Types of IRS Payment Plans?
There are three different types of individual IRS payment plans:
- Pay Now: You pay the total taxes you owe the IRS immediately. If you choose this option, there is a $0 set-up fee and no interest or future penalties. You can pay from a checking or savings account using an ACH transfer (Direct Pay), pay online using the Electronic Federal Tax Payment System (EFTPS), or pay via check, debit, credit card, or money order.
- IRS Short-term Payment Plan: You pay the total taxes you owe the IRS in 120 days or less. With a short-term payment plan, you can make payments through Direct Pay. If you pay by credit card there is an additional fee. There is no setup fee for a short-term payment plan. You will accrue additional interest and penalties until you pay off your full tax debt.
- Long-term Installment Agreement: You pay the total taxes you owe the IRS in monthly payments over time (usually 72 or 84 months). With an IRS installment agreement, you can pay using the Electronic Federal Tax Payment System (EFTPS) with Direct Debit from a checking or savings account. You can also make monthly installment payments with a check, money order, credit card, or debit card. For those who choose Direct Debit, the setup fee is $31 online and $107 otherwise. Paying any other way will result in a setup fee of $149 online and $225 for other methods. Like short-term IRS payment plans, you will accumulate interest and penalties until your tax debt is fully paid.
How Do I Know If I Qualify for an IRS Payment Plan?
Each tax situation is different, so your IRS payment plan eligibility will depend on a few factors. In almost all but a very few cases, you won’t be eligible until you file all applicable tax returns.
- If you owe the IRS less than $50,000 including penalties and interest, you may be eligible for a long-term IRS payment plan (installment agreement).
- For short-term IRS payment plans, if you owe the IRS less than $100,000 including penalties and interest, you’re likely eligible
- Nearly everyone is eligible for the Pay Now option.
To find out if you qualify for an IRS payment plan you will need:
- Full Name from your tax return
- Mailing Address
- Date of Birth
- Filing Status
- SSN or ITIN
You may need to provide other information depending on the type of payment plan you’re applying for. Don’t worry, Wiztax can help you find out which IRS payment plan you qualify for.
How Much Does an IRS Installment Plan Cost?
Each IRS payment plan has its own payment plan fees. If you opt for the Pay Now plan, however, you don’t have any setup fees. It’s important to note that payments for tax debt over $25,000 must be Direct Debit. For both the short-term IRS payment plans and long-term IRS installment agreements, you will accrue interest until your tax balance is paid in full.
Does the IRS Waive Payment Plan Fees If I’m Low-Income?
If you’re considered low-income by the IRS, then your IRS payment plan fees may be waived for short-term IRS payment plans and may be lowered for long-term IRS installment agreements. Plus, if you meet certain additional conditions, then these fees may also be waived.
Is There a Way to Change an IRS Payment Plan?
You can see your current IRS payment plan details by logging into the Online Payment Agreement Tool and use the Apply/Revise button. If you need to make changes to the monthly IRS payment plan amount or due date, switch to a Direct Debit agreement, or reinstate after default, then you can use the Online Payment Agreement Tool to do so.
Are There Other Tax Relief Options in Addition to IRS Payment Plans?
Yes, the IRS offers other tax relief options for those who can’t pay the full tax amount they owe the IRS. IRS tax relief options include Offer in Compromise (OIC) and Currently Not Collectible (CNC) status. An Offer in Compromise is an offer you submit to the IRS to resolve your full tax debt for less than what you owe the IRS. With CNC status, you’re requesting that the IRS pause collection activity because making any immediate tax payments will result in financial hardship.
How Can Wiztax Help?
We can look at all the options that are available to you and tell you exactly what the best path forward will be. For those that are eligible, for example, an Offer in Compromise will ALWAYS be the better option. Call us today at (866) 568-4593 to learn more about how we can help, or start here to take our free online evaluation. Regardless, we promise to save you thousands in fees.
6 Simple Questions. Free Evaluation.
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