If you’re a qualified taxpayer or authorized representative (Power of Attorney), you will be able to apply for a payment including installment agreement online to pay off your balance over time. You will receive immediate notification of whether your plan has been approved, once you complete your online application.
After you’re qualified, your specific tax situation will determine which payment options are available to you. All of your tax returns should be up-to-date before you can request an IRS Payment plan. There will be payment plans that you can choose. Let’s find out the IRS payment plans in our post below!
IRS Payments Plans
The IRS offers two payment plans, including:
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- Short-Term Payment Plan
Short-term IRS payment plans should be paid within 120 days or less. This has now been extended to 180 days under the Taxpayer Assistance Initiative. You owe less than $100,000 in combined interest, tax and penalties.
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- Long-Term Payment Plan
Long-term payment plans will vary based on the amount of taxes you owe. Taxpayers who owe less than $10,000 typically have up to three years to pay. It applies if you owe $50,000 or less in combined tax, interest and penalties, and fill all required returns.
For those who have balances between $10,000 and $50,000 may be approved for repayment periods up to six years. If you owe over $50,000, the length of your installment agreement is determined on a case-by-case basis.
Setting Up IRS Payment Plans
After requesting an IRS payment plan, you may need to apply online through postal mail or ask for help from an experienced tax professional. It’s important to note that setup fees are decreased for those who pay monthly through automatic withdrawals.
If you select to use a tax professional, you will have to complete a power of attorney (POA), so they will be able to work with the IRS on your behalf. In most cases, those who have tax balances higher than $25,000 will also have to provide financial statements and documentation as part of the application process.
After your installment agreement is approved, the IRS will stop collection actions. Penalties and interest for the outstanding balance will continue to increase until your taxes are paid in full.
For more information, the IRS announced a number of changes to assist taxpayers resolve their tax issues under the new Taxpayer Relief Initiative, because of Covid-19. That includes several adjustments to new installment agreement applications, such as:
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- Those who qualify for a short-term payment plan now have up to 180 days (previously 120) to pay off their balances.
- Certain qualified taxpayers who owe less than $250,000 probably set up IRS payment plans without submitting additional financial statements if their monthly payment amount is sufficient.
- Some taxpayers who only owe 2019 taxes of $250,000 or less probably avoid a notice of federal tax lien if approved for an installment agreement.
What Do You Need to Apply for a Payment Plan?
Starting November 14, 2021, IRS usernames that were only used to access payment plans (Online Payment Agreement) cannot be used to sign in anymore. You will be required to make an account with ID.me and will need photo identification.
If you apply for a direct debit payment plan, you will need your bank account numbers and routing. If you recently filed your tax return or your return was examined, but you have not received a balance notice from the IRS, you will need the balance due that is shown on your return.
What does it cost? If the IRS approves your payment plan, one of the following fees will be added to your tax bill. Here are the plan options and costs:
Pay Now
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- $0 setup fee
- No future penalties or interest added
Pay the amount owed in full today directly from your checking or savings account (Direct Pay) or by money order, check or debit/credit card. Additionally, fees will apply when paying by card.
Short-Term Payment Plan (180 days or less)
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- $0 setup fee
- Plus fines and accrued interest until the balance is paid off
Once applying for a short-term payment plan, you will be able to pay the amount owed directly from your checking or savings account (Direct Pay0 or by check, debit/credit card or money order.
Long-Term Payment Plan (Installment Agreement)
Pay monthly through automatic withdrawals:
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- $31 setup fee (low income: setup fee waived)
- Plus fines and accrued interest until the balance is paid off
Pay amount owed through Direct Debit (automatic payments from your checking account), also known as a Dorect Debit Installment Agreement (DDIA). It will be required if your balance is more than $25,000.
Pay each month (non-Direct Debit)
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- $130 setup fee (low income: $43 setup fee that may be reimbursed if certain conditions are met.
- Plus fines and accrued interest until the balance is paid off
Once applying for a long-term payment plan, pay the amount owed through non-Direct Debit (not automated) monthly payments including payment directly from your checking or savings account (Direct Pay) or by money order, check or debit/credit card.
Revise an Existing Payment Plan or Reinstate After Default
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- $10 fee that may be reimbursed if you’re identified as low income and certain conditions are met.
How to Review or Revise an Existing Plan?
You definitely can see details of your current payment plan including type of agreement, due dates and amount you have to pay) by logging into the Online Payment Agreement tool with the Apply/Revise button.
You will be able to use the Online Payment Agreement tool to create the following changes:
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- Change your monthly payment due date
- Change your monthly payment amount
- Reinstate after default
- Convert an existing agreement to a Direct Debit agreement
- Change the bank routing and account number on a Direct Debit agreement
You can also log into the Online Payment Agreement tool using the Apply/Revise button available on the IRS Gov site.
If you want to revise an online payment plan, you can log into the Online Payment Agreement tool using the Apply/Revise button available on the IRS Gov site here. On the first page, you will be able to revise your current plan type, amount and payment date. After that, you can submit your changes.
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