Setting up an IRS payment plan is explained here. IRS stands for Internal Revenue Service, the government agency responsible for tax collection and tax law enforcement in the United States. Setting up a monthly payment plan with the IRS is not as difficult as you might think and can be done by either you or your tax professional. The installment agreement can be set quickly either over the phone, by filling out some paperwork, or by using the Online Payment Agreement web application.
Type of IRS Installment Agreements
Note that there are four basic types of installment agreements you can choose from: guaranteed, streamlined, partial payment, and non-streamlined. Before opting for either one, it is important to review which installment agreement the IRS might approve for your case and choose the one that best fits your budget. Here is how to do that.
1. Find how much you owe in unpaid taxes. In order to do that, you should call the IRS or get out copies of your tax returns to verify the amount you owe, which includes your original tax due, plus interest and penalties.
2. Be aware of the fact that the IRS charges a user fee to set up a payment plan, as follows:
- $52 for direct debit installment agreements;
- $105 for new installment agreements without direct debit;
- $45 for restructuring or for reinstalling a defaulted installment agreement;
- low-income taxpayers can request a lower fee of $43.
3. Set up a payment plan by filling out Form 9465, Installment Agreement Request, or simply using the Online Payment Agreement Application on the IRS website.
4. Choose a day of the month you want to make your payments. Remember that you can choose any day you want between the 1st and the 28th of the month, but you must make your payment by that day each and every month. Choose wisely.
5. Choosing the monthly payment amount comes next, which should also be done wisely. Keep in mind that you must pay at least the amount you choose each and every month. You can always pay more, but you should write down the minimum you are willing to pay every month so you can rest assured that you don’t fall behind with your payments.
6. You now have to wait for the IRS to get back to you; they usually respond to requests within 30 days.
7. All that is left is for you to make the payments each and every month. You can pay either by check, credit card, money order, EFTPS, or automatic withdrawals from your checking account.
Setting Up an IRS Payment Plan
These are the steps you need to follow in order to set up an IRS payment plan. This process is not very complicated, but expect about two hours to complete it. Here are some tips on what you will need in order to do that:
- copies of your tax returns;
- a good idea of how much you can afford to pay each month;
- your checkbook or a voided check if you are setting up automatic withdrawals;
- register with EFTPS if you want to use the IRS bill pay system.
Also, it would be useful to have the following tips in mind:
- You can request an installment agreement over the phone by simply calling the IRS. They will set up a payment plan over the phone and then send you the paperwork you need to fill out.
- The IRS must agree to accept your installment agreement if you meet certain criteria – your total tax does not exceed $10,000 and the monthly payments will pay your tax debt in full within 3 years.
- The IRS will not accept your installment agreement if you have not filed all your tax returns. Before requesting a monthly payment plan, you will need to file all your back taxes.
- If you have chosen checks or money orders as your payment method, make sure you mail your monthly payment to the IRS about 7 to 10 days before the due date to avoid any delay in the mail. This will make sure the payment gets to the IRS on time.
- If this process is too much of a hassle for you, ask for the help of your tax professional. This is also a good idea if you need to negotiate a lower monthly payment or if you don’t meet IRS’ criteria for automatic acceptance of an installment agreement.
NOTICE: The IRS can change rules and regulations without notice. Please be sure to check with your tax consultant before filing any form with the IRS.
IRS info on setting up an IRS Payment Plan is here.