What Is the IRS Payment Plan and How Does It Work
Few people like to receive unexpected tax charges while filing their tax returns. It's natural to feel overwhelmed when that balance turns out to be more than you can afford.
Fortunately, the IRS offers a few tax payment plans to help you pay your amount over time. You can do it yourself online, over the phone, or in person. Interest and penalties will still apply when you pay off your obligation, but these fees may be lower than if you put your full tax bill on a high-interest credit card, for example.
Most importantly, do not postpone filing your return due to a tax bill. This may result in extra late-filing costs for each month or a portion of a month that your return is late. Instead, file your return, pay what you can, then check into an IRS payment plan or other tax debt relief options.
What is an IRS payment plan (installment agreement)?
An IRS payment plan is a direct agreement you make with the government to pay your federal tax due over a set period of time. The IRS provides both short-term and long-term payment plans.
Short-term payment plan
A short-term tax payment plan allows taxpayers to pay off their tax burden in 90 or 180 days.
Long-term payment plan
A long-term tax payment plan, also known as an installment agreement, allows taxpayers who require more than 180 days to settle their tax liability to pay it off in monthly installments.
Which agreement is best for you depends on how much you owe and how quickly you believe you can pay it off. As long as you stick to your plan, the agency is unlikely to issue a tax levy or a tax lien.
It is important to note that enrolling in an IRS payment plan does not exempt you from paying interest and penalties for late payments. These accumulate until your balance reaches zero.
Who is eligible for an IRS payment plan?
If you fulfill the following criteria, you can apply online for a short- or long-term plan through the IRS' Online Payment Agreement tool:
The long-term зayment plan: You owe $50,000 or less in combined tax, penalties, and interest, you've filed all of your tax forms, and your tax bill may take more than 180 days to pay.
The short-term payment plan: You owe less than $100,000 in combined tax, penalties, and interest, you've filed all of your tax forms, and you can pay down your tax debt in 90 or 180 days.
If the tool decides that you are ineligible, the IRS says you can still apply for a tax installment plan by filing Form 9465 or phoning the IRS' main hotline.
How to apply for an IRS payment plan
If you qualified for a short- or long-term payment plan, you may apply online via the IRS' payment plan application page.
As previously stated, you can also apply for an IRS payment plan by mail (use IRS Form 9465).
Applying for an IRS payment plan online
If you previously registered for an online IRS account to obtain a tax transcript or an identity protection PIN, you can use the same user ID and password to access the IRS' Online Payment Agreement service. If not, you must create an ID.me account to prove your identity, which requires the following information:
A valid email address and email access.
Identification with a photograph (driver's license, state ID, passport).
Your Social Security number or tax identification number.
You must have access to a smartphone or a webcam to prove your identity.
Multi-factor authentication requires access to a phone or email.
Minimum monthly payments for IRS installment plans
Generally, if you have a long-term payment plan, you have the option of determining how much you pay each month. That is, the IRS will inquire as to how much you can pay. You must, however, set a payment amount that will pay off your loan in 72 months.