IRS payment plan options – What are they and how do I get one?
According to IRS.com, a payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe. If you qualify for a short-term payment plan you will not be liable for a user fee. Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action.If the IRS approves your payment plan, one of the following fees will be added to your tax bill. Changes to user fees are effective Jan. 1, 2017. For individuals, balances over $25,000 must be paid by direct debit. For businesses, balances over $10,000 must be paid by direct debit.
How do you set up a payment plan?
“Setting up a payment plan with the IRS is relatively easy to do. You need to apply to the IRS for an installment agreement (completing online or filling out Form 9465),” said LendingPoint’s Chief Accounting Officer and CPA Christina McGeehen. “Approvals decisions are made almost immediately if filing online.”
What are my plan options?
“There are short term (less than 120 days) and long term (more than 120 days) payment plans available and monthly pay by check or monthly auto draft options available,” said McGeehen. “There aren’t any setup fees for short term payment plans and it’s only a $31 setup fee for long term payment plans if paying by monthly auto draft ($149 setup fee if paying by check). Penalties and interest will continue to accrue on all payment plans until the balance is paid in full.”If you are an individual, you may qualify to apply online if:
- Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
- Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.
How do I determine if I qualify for a Reduced User Fee?
Form 13844: Application for Reduced User Fee for Installment Agreements (PDF), gives you the steps to see if you are qualified to receive a reduced user fee. If you are not charged a reduced user fee and you believe you are eligible, submit Form 13844. If you are a qualified applicant, send your form within 10 days to the address below:
Internal Revenue Service
PO Box 219236, Stop 5050
Kansas City, MO 64121-9236
In order to avoid default of your payment plan, make sure you do your best to understand and manage your account accordingly. Here are 4 tips you can use to help prevent defaulting on your account:
- Pay your monthly minimum each month. Don’t be late.
- File on time and pay taxes in full if possible.
- Make all payments even if a refund is applied to your balance.
- Make sure to double check payment information such as the address you are sending payments to or by reviewing confirmation letters.
Additional tips on an IRS payment agreement
“Upon applying, you submit the monthly payment amount for what you feel you can afford to make each month but you need to stick to it,” said McGeehen. “Penalties are roughly 5% of the unpaid tax bill and interest accrues daily until paid in full. The benefits of setting up a payment plan are that interest and penalties are typically less than conventional rates for other borrowings and peace of mind with the IRS of having an agreement in place to pay the tax you owe!”
However, if you decide to forgo the IRS payment plan and pay off the overdue amount all at once, LendingPoint can help. With a simple online application that only takes a few minutes, LendingPoint could show you funding options that could get you the money you need as soon as the next business day. Checking your options won’t affect your credit score. Apply today.
*LendingPoint is not offering tax advice. If you have any further questions about taxes or tax implications, please consult a tax advisor.