If you owe taxes and are unable to pay the full amount, what can you do? The first thing I would look into is an Installment Agreement or simplistically, a monthly payment plan. The IRS only allows Installment Agreements under specific situations.
What are the benefits of paying my taxes on time?
By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline.
If you’re not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There’s also a penalty for failure to file a tax return, so you should file timely even if you can’t pay your balance in full. It’s always in your best interest to pay in full as soon as you can to minimize the additional charges.
If you can’t pay the full amount due, pay as much as you can and visit http://www.irs.gov/payments to consider online payment options.
What are IRS payment plan costs and fees?
If the IRS approves your payment plan (installment agreement), one of the following fees will be added to your tax bill. For individuals, balances over $50,000 must be paid by Direct Debit. For businesses, balances over $10,000 must be paid by Direct Debit.
Short Term Payment Plan
Pay amount owed in 180 days or less
*Note – only individual taxpayers can apply for a short-term payment plan online.
| Payment Method | Costs |
| After applying for a short-term payment plan, payment options include: Pay directly from a checking or savings account (Direct Pay) (Individuals only) Pay electronically online or by phone using Electronic Federal Tax Payment System (EFTPS) (enrollment required) Pay by check, money order or debit/credit card Fees apply when paying by card | Apply online: $0 setup fee (individuals only, currently limited to 120 days) Apply by phone, mail, or in-person: $0 setup fee (up to 180 days) Plus accrued penalties and interest until the balance is paid in full |
Long Term Payment Plan (Installment Agreement)
Pay amount owed in monthly payments
| Payment Options | Costs |
| Option 1: Pay through Direct Debit (automatic monthly payments from your checking account), also known as a Direct Debit Installment Agreement (DDIA). | Apply online: $31 setup fee Apply by phone, mail, or in-person: $107 setup fee Low income: Apply online, by phone, or in-person: setup fee waived Plus accrued penalties and interest until the balance is paid in full |
| Option 2: After applying for a long-term payment plan, payment options include: Make monthly payment directly from a checking or savings account (Direct Pay) (Individuals only) Make monthly payment electronically online or by phone using Electronic Federal Tax Payment System (EFTPS) (enrollment required) Make monthly payment by check, money order or debit/credit card Fees apply when paying by card | Apply online: $149 setup fee Apply by phone, mail, or in-person: $225 setup fee Low income: Apply online, by phone, or in-person: $43 setup fee which may be reimbursed if certain conditions are met Plus accrued penalties and interest until the balance is paid in full |
Why do I owe interest and penalties?
Interest and some penalty charges continue to be added to the amount you owe until the balance is paid in full. Learn more about penalties and interest.
Why do I have to pay a setup fee?
The Office of Management and Budget has directed federal agencies to charge user fees for services such as the Installment Agreement program. The IRS utilizes the user fees to cover the cost of processing installment agreements.
Things to Consider Before Requesting an Installment Agreement
Before you get started however there are a few questions you should answer for yourself
How Much Do You Legally Owe?
The IRS feels you owe them money and potentially penalties and fees. However, have you double checked their claims? What if they are wrong? You could be paying back taxes and penalties you don’t actually owe.
How long do you need to pay?
The IRS offers several different terms for payment plans. Depending on which plan, you select you can get between 180 days to 6+ years to pay.
Which IRS payment plan is right for you?
There are numerous options depending on factors like your income, your assets, your disposable income, and your past tax filing status, individual, joint, business or other.
Do You Have Time and Experience?
Completing your old tax returns, reconciling them and getting up to date is just one of the many tasks you’ll need to complete just to apply. Doing accurate calculations in order to complete tax relief application forms is another, and there is no turbo tax to help.
So before you contact the IRS and start a process you don’t know much about to enter yourself into a binding agreement that you may not be able to afford and may have trouble getting out of, give The W Tax Group a call. We offer a 100% free consultation where we will review your tax case and provide guidance on the proper course of action is for YOU.
