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How to Request an IRS Payment Plan for Back Taxes
How to Request an IRS Payment Plan for Back Taxes
If you owe back taxes to the IRS, requesting a payment plan can help you pay off your tax debt over time. A payment plan allows you to make monthly payments on your balance instead of paying it all at once. Here’s what you need to know about requesting an IRS payment plan for back taxes.
Benefits of an IRS Payment Plan
Some key benefits of setting up an IRS payment plan include:
- Avoiding tax liens or levies – The IRS will not take enforced collection actions like filing a tax lien or issuing a levy against your property as long as you stick to the terms of your payment plan.
- Paying over time – Spreading payments out over several months or years makes it easier to afford than paying in one lump sum.
- Peace of mind – Having an established payment plan can give you peace of mind that you’re addressing your tax debt.
- Lower penalties and interest – Penalties and interest may continue accruing, but generally at a lower rate once you have a payment plan.
How to Request an IRS Payment Plan
There are a few different ways you can request an IRS payment plan, including:
- Online – The IRS offers an Online Payment Agreement tool where you can apply for a payment plan electronically. This is the fastest option.
- Phone – You can call the IRS at 800-829-1040 to speak with a representative and request a payment plan over the phone.
- Paper Form – Fill out Form 9465 and mail it to the IRS along with your tax returns.
- In person – Visit your local IRS office and speak with a representative in person about setting up a payment plan.
Before applying, make sure to have your tax returns for the years you owe ready along with records of your income, expenses and assets. The IRS will use this information to determine the payment plan options you qualify for.
Types of IRS Payment Plans
The IRS offers short-term and long-term payment plan options:
Short-Term Payment Plans
- 120-day payment plan – For balances under $25,000, pays off balance in 120 days or less.
- 180-day payment plan – For balances between $25,000-$50,000, pays off balance in 180 days or less.
Long-Term Payment Plans
- Monthly payment plan – Makes monthly payments for up to 72 months and requires a setup fee.
- Partial pay installment agreement – Pay a portion of what you owe each month based on your ability to pay.
- Offer in Compromise – Settle your tax debt for less than the full amount owed in certain circumstances.
The IRS will determine which payment plan options you qualify for based on factors like your income, expenses, assets, and amount owed. Longer-term plans generally require passing a financial analysis.
What Happens After You Apply?
After you submit your IRS payment plan request, here’s what to expect:
- The IRS will review your application along with your financial information.
- You may have to provide further documentation to support your request.
- The IRS will notify you by mail within 30 days whether your payment plan has been approved.
- If approved, you will receive details about your required monthly payment amount and due dates.
- The IRS will begin processing monthly payments from your bank account if you set up direct debit payments.
It’s important to stick to the terms of your approved payment plan. If you miss payments, your plan could default and the IRS could resume collection actions. Contact the IRS immediately if you think you may have trouble making payments.
Tips for Requesting an IRS Payment Plan
Follow these tips when applying for an IRS payment plan:
- Gather all required financial documents before applying.
- Be realistic about what you can afford to pay each month.
- Apply as soon as possible – don’t wait until you receive a notice from the IRS.
- Consider enlisting help from a tax professional for assistance.
- Opt for direct debit payments to avoid missed payments.
- Keep copies of all correspondence and documentation.
- Contact the IRS promptly if you need to modify your plan.
Other Payment Options
If you don’t qualify for a payment plan, some other options to resolve your tax debt may include:
- Obtaining a loan to pay your balance in full
- Selling assets to help pay what you owe
- Credit card payment – allows you to pay immediately but will incur fees
- Delaying collection with a temporary deferment – halts IRS collection actions
Explore all your options and see what makes the most financial sense for your situation. The key is being proactive about addressing your tax balance. Ignoring it will only make the problem worse over time as interest and penalties accrue.
Setting up an IRS payment plan can provide a more manageable way to pay off your tax debt compared to paying in one lump sum. Just be sure to stick to the terms so you can pay off your balance over time without the stress of mounting IRS collection actions.
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