Not everyone gets a refund. Sometimes you owe money to the IRS — and it could be a lot. Fortunately, the IRS offers options.
If you’re a qualified taxpayer or an authorized representative through a power of attorney, you can apply online for a payment plan, which will include an installment agreement to pay off your balance over time. Your specific tax situation will determine which payment options are available. These include:
- Full payment.
- A short-term payment plan for 120 days or less.
- A long-term payment plan — an installment agreement that you can pay in more than 120 days.
You may qualify to apply online if:
- 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 (long-term payment plan).
Individual payment plans are also available to sole proprietors and independent contractors. You do need certain information to apply:
- Your name and address, exactly as they appear on your most recently filed tax return.
- A valid email address.
- Your date of birth.
- Your filing status.
- Your Social Security or individual tax ID number.
- The balance due amount.
To confirm your identity, you’ll need one of the following:
- Your financial account number.
- A mobile phone registered in your name.
- An activation code received by postal mail, which takes five to10 business days.
If your payment plan is approved by the IRS, there are certain rules and fees: If you owe a balance over $25,000, you must make automatic payments from your checking account or direct debit. For a short-term plan of 120 days or less, there’s no setup fee, but penalties and interest keep accruing until the balance is paid in full. After you’ve applied for a short-term payment plan, you can pay the amount owed directly from your checking or savings account via Direct Pay or by check, money order or debit/credit card. Fees apply when paying by card.
For a long-term payment plan via an installment agreement, paid in more than 120 days with monthly payments, you can pay through automatic withdrawals and you’ll be charged a $31 setup fee, unless you’re deemed a low-income taxpayer. In that case, the setup fee is waived, but penalties and interest are accrued until the balance is paid in full.
You can make direct debit payments automatically from your checking account. This is required if your balance is more than $25,000. However, if you don’t pay through direct debit, you have to pay each month via your checking or savings account with a check, money order or debit/credit card. There’s a $149 setup fee. For low-income individuals, a $43 setup fee is reimbursed if certain conditions are met. Penalties and interest accrue until the balance is paid in full.
If you want to revise an existing payment plan or installment agreement or wish to reinstate after default, you’ll be charged a $10 fee, which may be reimbursable.