Can You Pay Back Taxes in Payments?

The Internal Revenue Service (IRS) provides several options to manage and pay off tax debt over time if you cannot pay in full. These arrangements help people meet their obligations without suffering immediate, severe financial hardship. Understanding the different payment plans is the first step toward resolving an outstanding tax balance.

Available IRS Payment Arrangements

A short-term payment plan provides up to 180 additional days to pay the full balance. While interest and late-payment penalties continue to accrue, the IRS does not charge a fee to set up this extension. This arrangement is suitable for individuals who anticipate having the necessary funds within a six-month window.

For those who need more time, a long-term payment plan, known as an Installment Agreement, is an option. This agreement involves monthly payments for up to 72 months. Setup fees vary by application method; applying online is less expensive than by phone or mail. An online agreement with direct debit payments may have a setup fee of $31, while other methods could cost over $100.

An Offer in Compromise (OIC) is for taxpayers in significant financial distress, allowing them to resolve their tax liability for less than the original amount owed. The process requires a review of the taxpayer’s ability to pay, income, expenses, and asset equity. Applying for an OIC involves a non-refundable $205 application fee and an initial payment, though these may be waived for low-income taxpayers.

Eligibility and Required Information

To be eligible for any IRS payment plan, you must have filed all required tax returns. For a short-term plan, the total combined tax, penalties, and interest must be less than $100,000. For a long-term installment agreement, the streamlined application process is available to those who owe $50,000 or less in combined tax, penalties, and interest.

To apply for a plan, you will need to provide personal and financial details, including:

• Your full name as it appears on your most recent tax return
• A valid email and mailing address
• Your date of birth
• Your Social Security Number or Individual Taxpayer Identification Number (ITIN)
• The total amount of tax you owe
• Information from your most recently filed tax return

For an Offer in Compromise or an installment agreement for a higher debt amount, more detailed documentation is required to show your financial situation. The IRS uses specific forms to gather a complete picture of your finances.

Form 9465, Installment Agreement Request

When applying for a long-term payment plan by mail, you will use Form 9465, Installment Agreement Request. This form asks the IRS to allow you to make monthly payments. To complete it, you must enter your personal information, the tax year for which you owe, the total amount owed, and any amount you can pay immediately. The form requires you to propose a monthly payment amount and the date you will make your payment each month.

Form 433-F, Collection Information Statement

If you owe more than $50,000 and request an installment agreement, or if you apply for an Offer in Compromise, the IRS requires Form 433-F, Collection Information Statement. This form provides a detailed snapshot of your financial health. You will need to report information about your employer, wages, and other sources of household income. The form also requires an accounting of your assets and a list of your monthly living expenses to determine your ability to pay.

How to Apply for a Payment Arrangement

Once you have determined your eligibility and gathered the required information, you can proceed with the application. The IRS provides several methods to apply, allowing you to choose the one that is most convenient for your situation.

Applying Online

The fastest way to apply is through the IRS’s Online Payment Agreement (OPA) tool. This system is available for individuals who owe less than $100,000 for a short-term plan or $50,000 for an installment agreement. You will need to verify your identity through the IRS’s secure login process, which may involve an ID.me account. Once logged in, you can enter your tax information, propose payment terms, and provide bank details for direct debit, which often results in a lower setup fee.

Applying by Phone

You can set up a payment plan by calling an IRS representative at 800-829-1040. Before calling, have all your information ready, including completed forms if applicable. The representative will ask for your personal, tax, and financial data to process your request. This method is useful if you have questions or a complex situation.

Applying by Mail

Applying by mail is also an option. You will need to send your completed Form 9465, and Form 433-F if required, to the IRS service center address listed in the form’s instructions. If responding to a tax notice, mail the form to the address provided in the notice.

What to Expect After Applying

After submitting your request, the IRS will review your application and notify you of its decision by mail. The response will either approve your plan, reject it with an explanation, or propose an alternative. Approval for online applications is often immediate, while mailed applications can take 30 days or more. If your plan is approved, begin making payments on time to avoid defaulting on the agreement.