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IRS Installment Payments

By Peoples Tax | November 21, 2019

Our income tax system is designed to be “pay as you go,” which means that citizens are expected to pay taxes when the income is earned.   Most taxpayers follow the plan and have taxes withheld from their paychecks or make quarterly estimated payments.  Many of these taxpayers have deposited more than they owe at the end of the year and will receive a refund when they file their tax return.  Others find themselves owing more taxes at filing time. 

Taxpayers who owe additional taxes at filing time are expected to pay any amount due no later than the filing deadline each year.  Most taxpayers simply pay the additional taxes at that time but occasionally taxpayers find themselves unable to pay the balance due. 

If this happens to you the IRS has programs in place to allow you to pay your taxes over an extended period.  You may apply for a payment plan online using the Online Payment Agreement tool https://www.irs.gov/payments/online-payment-agreement-application. Taxpayers you may apply by telephone, mail or in-person by filing Form 9465, Installment Agreement Request.

The type of plan that is best for you depends on the amount you owe and how soon you can pay it.

Short-Term Payment Plan

If you can pay the amount owed in 120 days or less, you may apply for a short-term payment plan. Penalties and interest on the unpaid balance will continue to accrue until the balance is paid in full. Individuals are not charged a setup fee for a short-term payment plan.  Payment options for a short-term plan are:

  1. Direct Debit from your checking or savings account.
  2. Electronic payment online or by telephone using EFTPS (after enrollment)
  3. Check or money-order
  4. Debit or credit card. (Extra fees apply)

Individuals whose balance due is over $25,000 must agree to make payments by Direct Debit.  Businesses must use the Direct Debit option if their balance over $10,000.

Long-Term Installment Plan

This program is for taxpayers who need to make monthly payments over more than 120 days.  If the application is filed online a $31.00 setup fee applies.  The IRS offers two payment programs for long-term installment plans:

  1. Direct Debit Installment Agreement
    1. Automatic monthly payments from your checking account
    1. Online setup fee is $31.00
    1. The setup fee for telephone, mail or in-person applications is $107.00
    1. The setup fee will be waived for low income.
    1. Penalties and interest will continue to accrue on the unpaid balance.
  2. Long-Term Payment Plan—Payment Options
    1. Direct Pay–monthly payments from a checking or savings account (individuals only)
    1. Electronic payments online or by phone using EFTPS
    1. Monthly payment by check, money order
    1. Monthly payment by debit or credit card (fees apply)
    1. Setup fee for online is $149. In-person, telephone or mail in applications are charged a $225 setup fee.
    1. The setup fee will be $43 for low income persons
    1. Penalties and interest will continue to accrue on the unpaid balance.

If you need assistance establishing a payment plan or have questions about resolving a tax issue, contact Peoples Income Tax. Peoples Tax has expert tax professionals on staff that can help you! Give us a call at (804) 204-1040 or email us today to find out how we can assist you!

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