Can You Pay Your Taxes in Payments?
Understand the official methods for paying a tax balance over time. This guide explains the structured arrangements offered by the IRS and how to apply.
Facing a tax bill that you cannot pay all at once can be a stressful situation. The Internal Revenue Service (IRS) understands that taxpayers may need flexibility. The agency provides several structured payment options that allow individuals to resolve their tax liabilities over an extended period. These programs are designed to help taxpayers meet their obligations without facing immediate and severe financial hardship.
Available IRS Payment Options
The IRS offers several payment arrangements tailored to different financial situations. To be eligible for these options, a taxpayer must have filed all required tax returns. One common option is a short-term payment plan, which grants up to 180 additional days to pay a tax liability in full. This solution is available to individuals who owe less than $100,000 in combined tax, penalties, and interest, and it has no setup fees.
For those who require a longer period, the IRS provides long-term payment plans, also known as installment agreements. These plans allow taxpayers to make monthly payments for up to 72 months. To be eligible for an online application for an installment agreement, an individual must owe a combined total of $50,000 or less in tax, penalties, and interest.
An Offer in Compromise (OIC) allows certain individuals to resolve their tax liability with the IRS for a lower amount than what they originally owed. The IRS may accept an OIC if there is doubt the tax can be collected, a dispute over whether the tax debt is correct, or a belief that paying the full amount would create an economic hardship. The agency evaluates your ability to pay, income, expenses, and asset equity. To apply, you must not be in an open bankruptcy proceeding.
Setup fees for long-term installment agreements vary by application method. Online applications cost $31 with a direct debit payment plan or $130 without one. Applying by phone or mail costs $107 with direct debit and $225 without it. These fees may be waived for low-income taxpayers. For taxpayers with balances between $25,000 and $50,000, the IRS requires payments to be made through a direct debit from a bank account.
Information and Forms for Your Application
Before initiating a payment plan application, you will need to have specific personal details readily available, including:
- Your full name as it appears on your tax return
- A valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Your date of birth and tax filing status
- Your current contact information
- The amount of tax you owe and the applicable tax year or years
The primary document for requesting a long-term payment plan is Form 9465, Installment Agreement Request. This form requires you to input your personal information, the total amount you owe, and the monthly payment amount you propose to make.
In certain situations, particularly for larger installment agreements or an Offer in Compromise, you may need to complete Form 433-F, Collection Information Statement. This form provides the IRS with a detailed snapshot of your financial situation. You will need to disclose information about your monthly income, necessary living expenses, and a list of your assets.
How to Set Up a Payment Plan
The most direct method to apply is through the IRS’s Online Payment Agreement (OPA) tool, which is accessible on the IRS website. This portal guides you through verifying your identity and entering your financial details to request a payment plan. After you submit the application online, you will receive an immediate notification indicating whether your proposed plan has been approved.
Alternatively, you can apply for a payment plan by mail by sending your completed forms to the IRS. The correct mailing address depends on where you live and can be found in the instructions for Form 9465 or on the IRS website. Ensure all forms are signed and dated to avoid processing delays.
After submitting your application, the IRS will formally notify you of its decision. If your payment plan is approved, the notification will detail the terms of your agreement, including your monthly payment amount and due date. It is important to begin making payments as scheduled to keep your account in good standing and avoid default.