The Internal Revenue Service offers irs online payment plans to facilitate tax payments. Your tax situation determines the selection between short-term (120 days or less) and long-term (over 120 days) agreements.
Each option has unique requirements. For a long-term plan, your combined tax, penalties, and interest should not exceed $50,000, and you must have filed all necessary returns. For a short-term plan, your combined dues should be less than $100,000.
Let’s dig into these options and look at how each might help you.
An IRS online payment plan can be a lifeline for a taxpayer who owes taxes. By splitting the total amount owed into manageable monthly payments, it provides an avenue for individuals to clear their tax debt without the financial strain of a lump sum payment. This can be particularly beneficial for those going through financial hardship or those who have accumulated a significant amount of tax debt.
Moreover, entering into a payment plan with the IRS can also help to avoid the severe consequences of unpaid taxes. These can include a lien on personal property, wage garnishment, or even legal action. By sticking to the agreed payment plan, taxpayers can avoid these outcomes while gradually paying off their debt. It also provides them with a clear roadmap of when their debt will be paid off, allowing for better financial planning.
If you are able to enter into a payment plan, it allows you to break down your tax debt into regular, manageable monthly payments, instead of being overwhelmed by the obligation of paying the entire amount all at once. This can be a significant relief for those who might be financially strained. The process to apply for a payment plan is fairly straightforward – you can apply online, by phone, or by completing and mailing in Form 9465, depending on your preference.
However, it’s important to note that if you owe more than $50,000, the process becomes more complex and there are additional steps to be completed. This includes a Form 433-F, which will require you to provide considerably more detailed financial information before a payment plan can be approved. This is designed to ensure that the IRS understands your financial situation in detail, to ensure that the payment plan is reasonable and manageable for you.
For many payment plan options, you have the flexibility to choose how much you are able to pay each month. While the IRS will attempt to get you to agree to the largest monthly payment they can, based on their assessment of your financial situation, you have the right to select your payment amount based on what you can afford.
However, it’s crucial to be careful when choosing your payment amount. If you fail to select an amount, or select an amount that is too low, the IRS will simply take the total amount you owe and divide it by 72, and that amount will be your monthly payment. Depending on the plan and payment method you select, there may be fees associated with setting up the payment plan. These fees can range from being minimal to over $100 to set up a payment plan. Keep in mind that this is in addition to any penalties and interest that may accrue on your outstanding tax debt.
If you owe less than $10,000 to the IRS, installment payment plans generally are automatically approved as long as you agree to pay your tax debt in three years or less. For amounts larger than that, approval is not guaranteed. For larger amounts of tax debt, even though payment plans are available, their approval is at the discretion of the IRS. If you fall into this latter category and owe more than $10,000 in taxes, obtaining approval of a payment plan on your own might be difficult, and you might not be able to obtain the best terms possible.
If you owe back taxes to the IRS and are attempting to reach a payment plan to settle your tax obligations, it might help to seek legal advice. The more complicated your tax situation, the more an experienced advocate can help you reach a better agreement. To help you deal with the IRS, in the Atlanta or Marietta areas, contact tax attorney Jeff Cohen, Attorney at Law. You can call me at (404) 937-1414 or use my online contact form.