What are IRS Payment Plans? How Do I Qualify Myself For An IRS Payment Plan?

If you cannot afford to pay your taxes on time, you might be able to qualify for a payment plan or installment agreement with the IRS.

• The IRS will ask you what you can afford to pay per month, encouraging you to pay as much as possible to reduce your interest and penalties.

If you choose not to answer, select too low of an amount, or let the IRS pick a payment amount for you, your minimum payment will be the amount that you owe divided by 72.

Fees for IRS installment plans

If you can pay off your balance within 120 days, it won't cost you anything to set up an installment plan.

• If you cannot pay off your balance within 120 days, setting up a direct debit payment plan online will cost $31, or $107 if set up by phone, mail, or in-person.
• If not using direct debit, then setting up the plan online will cost $149.
• If not using direct debit, setting up the plan by phone, mail, or in-person will cost $225.
• If you're a lower-income taxpayer, you may be able to reduce these fees.

The benefits of an installment agreement include:

• Allows you to pay your taxes over a period of time
• To some degree, you get to choose how much you want to pay every month
• Avoids IRS wage garnishments, levies or other collection actions
• Avoids property liens
• Each tax case is different in regards to what payment options are available to you.

There are three options available:

1. Long Term Payment Plan (Installment Agreement)
• The IRS will want to know about your income and expenses on Form 9465-FS. Your minimum payment will be your balance due divided by 72, as with balances between $10,000 and $25,000. A minimum payment does kick in, equal to your balance due divided by the 72-month maximum period.
• If you owe less than $10,000 to the IRS, your installment plan will generally be automatically approved as a "guaranteed" installment agreement. Under this type of plan, as long as you pledge to pay off your balance within three years, there is no specific minimum payment required.

Balance over $50,000

The IRS will conduct a more thorough review of your finances if you owe more than $50,000 in taxes.

• On Form 433-A, you'll have to provide detailed information on your investments, assets, income and bank accounts.
• If you have any meaningful assets, you might have to sell some to pay down your outstanding balance.
• Your minimum payment in this situation will be unique to the specific agreement you strike with the IRS.
2. Full Payment
3. Short-Term Payment (180 days or less)

Check to see if you may qualify online for a Payment Plan if:

• Long Term Payment Plan or installment agreement: If you owe $50,000 or less (combined tax, penalties & interest) and are in compliance (filed your tax returns).
• Short Term Payment Plan: You owe less than $100,000 in combined tax, penalties and interest.

Some Points to Note Before Applying for an IRS Installment Agreement:

• If you a miss a payment, your payment plan will most probably be voided
• Applications that request Direct Debit payment plans will require your bank routing and account numbers.
• The minimum monthly payment for your plan depends on how much you owe.
• You'll still owe penalties and interest for paying your taxes late, but it can help make the payments more affordable.