Let’s get down to the nitty-gritty. The IRS does offer payment plans. Before we tell you about the payment plans be sure you discuss your options with a tax professional. Remember Legal Tax Defense offers a free consultation. Call 800-231-3321 for your free consultation with a tax professional.
Now, the nitty-gritty on the payment plans.
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. No need to call or write to the IRS. The IRS notes that online are processed more quickly than requests submitted with electronically-filed tax returns. If a taxpayer just filed their return and knows that they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.
There are two types of plans.
- Short-term payment plan– The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties, and interest. There’s no fee for setting one up, though interest and the late-payment penalty continue to accrue.
- Long-term payment plan– Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties, and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a set-up fee normally applies. But low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.
Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments.
There are other payment options.
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. Taxpayers can request a delay by calling 800-829-1040.
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis.
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise.
I’ll always recommend talking to a tax attorney to discuss these and other options. Your free consultation with Legal Tax Defense is a great start. Call now to be connected!
Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues.
