Can You Split Tax Payments to the IRS?
If you can't pay your tax bill in a single transaction, learn about the official IRS processes for arranging payments over time or from various sources.
Taxpayers have several ways to manage their payment obligations to the Internal Revenue Service (IRS). It is not always necessary to pay the entire amount in a single transaction by the tax deadline. The IRS provides structured pathways for individuals to settle their tax bills through different methods or over an extended period. These options accommodate various financial situations.
Paying a Tax Bill with Multiple Methods
Taxpayers who can pay their full liability by the tax deadline but need to use more than one payment source have options. The IRS allows payments to be split across multiple transactions, such as making partial payments from different bank accounts using the free IRS Direct Pay system. This service allows payments to be scheduled in advance from a checking or savings account.
When paying with a debit or credit card, the transaction is handled by a third-party payment processor. These processors permit multiple payments, meaning a taxpayer could use two different credit cards to settle their total bill. These processors charge a fee for each transaction, which varies depending on the card and processor used. These methods are for paying the tax bill in full and on time, not for extending the payment period.
IRS Short-Term Payment Plan
For those who cannot pay their full tax liability by the due date but can satisfy it in the near future, the IRS offers a short-term payment plan. This arrangement provides up to 180 additional days to pay the balance in full, and there is no setup fee when applying online. This option is generally available to individuals who owe a combined total of less than $100,000 in tax, penalties, and interest.
While a short-term plan provides an extension, it does not stop costs from accumulating. Both penalties and interest continue to accrue on the unpaid balance until it is paid in full, and the interest rate is determined quarterly. This plan prevents the agency from starting more aggressive collection actions as long as the taxpayer pays by the new agreed-upon date.
IRS Long-Term Installment Agreement
When more than 180 days are needed to clear a tax debt, a long-term installment agreement is an option. This formal agreement allows taxpayers to make monthly payments for up to 72 months. To qualify for a streamlined agreement online, an individual must owe $50,000 or less in combined tax, penalties, and interest, and have filed all required tax returns.
Unlike the short-term plan, setting up an installment agreement involves fees that depend on the application and payment method. For online applications, the fee is $31 for a direct debit agreement or $130 for other payment methods. The fees are higher for applications by phone, mail, or in person, at $107 for direct debit and $225 for other methods. For low-income taxpayers, these fees may be waived or reduced to $43. Under this plan, the failure-to-pay penalty is typically reduced to 0.25% per month, but interest continues to accrue.
How to Apply for an IRS Payment Plan
The most direct way to request a payment plan is through the IRS website using the Online Payment Agreement (OPA) tool. This system allows taxpayers who meet the eligibility criteria to apply electronically and provides immediate feedback on approval. To use the OPA tool, you will need to verify your identity and have your tax information, such as your Social Security Number and the balance owed, available.
An alternative method is to file Form 9465, Installment Agreement Request. This form can be submitted with your annual tax return or mailed separately to the IRS. If the total amount owed is more than $50,000, you may also need to submit Form 433-F, Collection Information Statement.
Taxpayers can also apply for a payment plan by calling the IRS directly. The phone number is generally found on the tax bill or notice sent by the agency. This method can be used to set up a new agreement or to discuss modifications to an existing one.
State-Level Tax Payment Options
Tax obligations to a state are entirely separate from what is owed to the federal government. Each state has its own tax agency, often called the Department of Revenue, which manages the collection of state income taxes. These agencies typically offer their own payment plans with different rules, eligibility requirements, and fees than those offered by the IRS.
Most states provide options for both short-term extensions and long-term installment agreements, but the specific terms vary widely. To understand the available choices, taxpayers should visit the official website of their state’s tax authority for details on how to apply.