Home Forums IRS Tax Topics Tax Topic 202

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  • tara berks

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    Topic 202 – Tax Payment Options
    If you’re not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There’s also a penalty for failure to file a tax return, so you should file timely even if you can’t pay your balance in full. It’s always in your best interest to pay in full as soon as you can to minimize the additional charges.

    Paying electronically is a convenient way to pay your federal taxes online, by phone, or from a mobile device. Electronic payment options are available on our payments page and the IRS2Go app. You can schedule your payment in advance, and you’ll receive confirmation after it’s submitted. The IRS uses the latest encryption technology making electronic payments safe and secure. It’s quick, easy, and much faster than mailing in a check or money order.

    IRS Direct Pay is a secure service that lets you pay directly from your checking or savings account at no cost to you. You can use Direct Pay to pay your current and prior year 1040 series tax returns and more. After you complete five easy steps, you’ll receive instant confirmation after you submit your payment. With Direct Pay, you can use the “Look Up a Payment” feature to view your payment status. You can modify or cancel your payment there until two business days before your scheduled payment date.

    If you decide to pay by mail, enclose a check or money order with a copy of your tax return or notice. Make it payable to the United States Treasury and provide your name, address, daytime phone number, social security number, tax year, and form number (e.g., 2016 Form 1040) on the front of your payment.

    If you can’t pay in full, you should pay as much as possible to reduce the accrual of interest on your account. Please refer to Topic 158 for information needed to ensure proper credit of your payment. You should consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institution or a credit card. The interest rate and any applicable fees charged by a bank or credit card company are usually lower than the combination of interest and penalties set by the Internal Revenue Code.

    Full Payment Agreements of up to 120 days
    If you can’t pay in full immediately, you may qualify for additional time –up to 120 days– to pay in full. There’s no fee for this full payment agreement; however, interest and any applicable penalties continue to accrue until your liability is paid in full. You may be able to set up this agreement using the Online Payment Agreement (OPA) application or by calling us at 800-829-1040 (individuals) or 800-829-4933 (businesses).

    Installment Agreements
    If you’re not able to pay your balance in full immediately or within 120 days, you may qualify for a monthly installment agreement. To request an installment agreement, use the OPA application or complete Form 9465 (PDF), Installment Agreement Request, and mail it to us. An installment agreement allows you to make a series of monthly payments over time. The IRS offers various options for making monthly payments:

    Direct debit from your bank account,
    Payroll deduction from your employer,
    Payment by Electronic Federal Tax Payment System (EFTPS),
    Payment by credit card via phone or the Internet,
    Payment via check or money order, or
    Payment with cash at a retail partner.
    The IRS charges a user fee of $225 when you enter into a standard installment agreement or a payroll deduction agreement. If you enter a standard installment agreement and choose to pay via direct debit from your bank account, the user fee is $107. If you use the OPA application to request an installment agreement, the user fee is $149. If you use the OPA application to request an installment agreement and choose to pay via direct debit, the user fee is $31 for all taxpayers regardless of income levels. Note: The user fee for restructuring or reinstating an established installment agreement is $89 regardless of method of payment.

    Taxpayers with income at or below 250 percent of the Department of Health and Human Services poverty guidelines may apply for a reduced user fee of $43 for entering into a new installment agreement or restructuring or reinstating an established installment agreement. You can request the reduced fee by using Form 13844 (PDF), Application For Reduced User Fee For Installment Agreements.

    If you haven’t filed your return yet, you may submit Form 9465 (PDF) or attach a written request for a payment plan with the monthly payment amount and due date to the front of your return.
    If you have filed your tax return and can’t pay in full, you may request an installment agreement for your current tax liabilities using the OPA application. Even if the IRS hasn’t yet issued you a bill, you may establish a pre-assessed agreement by entering the balance you’ll owe from your tax return or notice of deficiency when prompted by OPA.
    If you can’t provide full payment after receiving a bill from the IRS, you may request an installment agreement using the OPA application. You also may submit Form 9465 (PDF) or attach a written request for a payment plan to the front of your bill.
    You may also request an installment agreement by calling the toll-free number on your bill, or if you don’t have a bill, call us at 800-829-1040 (individuals) or 800-829-4933 (businesses).
    Before your installment agreement request can be considered, you must be current on all filing and payment requirements. Taxpayers in an open bankruptcy proceeding aren’t eligible. You must specify the amount you can pay and the day of the month. You should base your monthly installment payment amount on your ability to pay and it should be an amount you can pay each month to avoid defaulting. Your payment date can be any day from the first to the 28th. The IRS expects to receive your payment ON the date you indicate, so be sure to figure mailing time (10 days) into the date you select. Usually, within 30 days, the IRS will respond to your request to advise you if it has approved it, denied it, or needs more information.

    Installment agreements by direct debit and payroll deduction enable you to make timely payments automatically and reduce the possibility of default. These convenient payment methods also allow you to avoid the time and expense of mailing monthly payments.

    For a direct debit installment agreement, you must provide your checking account number, your bank routing number, and written authorization to initiate the automated withdrawal of the payment. Apply by using the OPA application, contact us by phone or in person (by appointment only), or mailing us Form 9465 (PDF) with your checking account number and bank routing number.

    For a payroll deduction installment agreement, submit Form 2159 (PDF), Payroll Deduction Agreement. Your employer must complete Form 2159, as it’s an agreement between you, your employer, and the IRS. In some situations, the IRS may set up a regular installment agreement for you and convert it to a payroll deduction agreement upon receipt of the completed Form 2159 from your employer.

    Visit Payment Plans, Installment Agreements for more information.

    Offer in Compromise
    If you can’t full pay and an installment agreement won’t work, you may want to propose an offer in compromise (OIC). An OIC is an agreement between you and the IRS that resolves your tax liability by payment of an agreed upon reduced amount. Before the IRS will consider an offer, all filing and payment requirements must be current. Taxpayers in an open bankruptcy proceeding aren’t eligible to enter into an OIC. To confirm eligibility and ensure use of the current application forms, use the Offer in Compromise Pre-Qualifier tool. For additional information on OICs, refer to Topic 204.

    Temporarily Delay Collection
    If you can’t pay any of the amount due because payment would prevent you from meeting your basic living expenses, you can request that the IRS delay collection until you’re able to pay. If the IRS determines that you can’t pay any of your tax debt because of financial hardship, the IRS may temporarily delay collection by reporting your account as currently not collectible until your financial condition improves. Being currently not collectible doesn’t mean the debt goes away. It means the IRS has determined you can’t afford to pay the debt at this time. Penalties and interest continue to accrue until you’ve paid off the debt in full. We may ask you to complete a Collection Information Statement ( Form 433-F (PDF), Form 433-A (PDF) or Form 433-B (PDF)) and provide proof of your financial status (including information about your assets and your monthly income and expenses) before approving your request to delay collection. The IRS may temporarily suspend certain collection actions, such as issuing a levy (refer to Topic 201) until your financial condition improves. However, we may still file a Notice of Federal Tax Lien (refer to Topic 201) while your account is suspended. Please call the phone number listed below to discuss this option.

    Responding to Your IRS Notice
    It’s important to respond to an IRS notice. If you don’t pay your tax liability in full or make an alternative payment arrangement, the IRS has the right to take collection action. Refer to Topic 201 for information about the collection process.

    If you’re not able to make any payment at this time, please have your financial information available (e.g., pay stubs, lease or rental agreements, mortgage statements, car lease/loan, utilities) and call us at 800-829-1040 (individuals) or 800-829-4933 (businesses) for assistance.

    You have rights and protections throughout the collection process; see Taxpayer Bill Of Rights and Publication 1 (PDF), Your Rights as a Taxpayer. If you would like information about payment arrangements, installment agreements, and what happens when you take no action to pay, refer to Publication 594 (PDF), The IRS Collection Process.

    For more information about making payments, OPAs, and offers in compromise, click the Payments tab on the IRS homepage or go to IRS.gov/payments.

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