All the information you need to make an educated decision
IRS Payment Plans
You must pay your income taxes. As a taxpayer, you do not want to be in the position of owing late payment to the IRS, but, unfortunately this sometimes happens. The interest on taxes owed to the IRS compounds daily, and strict monthly late fees are charged to the already struggling taxpayer. Businesses in the DebtHelp network can help you determine your best payment option for relieving federal tax debt.
It is always best to pay your taxes in full, before they are due, but if this is not possible you may have several payment plans available to you. Options for paying your federal income tax debt include:
- Short-term payment extensions
- Installment agreements
IRS Tax Loans
If your financial situation allows, you should considering applying for a loan that can be used to pay off your tax debt. Bank interest rates usually are much lower than IRS rates, so funding your payment through a loan will save you money by allowing you to pay off your tax debt sooner.
Short-term Payment Extensions
If financing your payment through a loan is not for you, you may be eligible for a short-term payment extension offered by the IRS. Extensions are granted from 10 to 120 days, during which time you will be expected to fulfill your payment obligations. Payments may be made either partially or in full, and each should represent the highest amount that you are able to pay at that time. Please remember that even with a payment extension, you will be charged all of the interest compounded on your debt, as well as the appropriate monthly late fees.
If you can't pay the full amount you owe the IRS, you may be eligible for an installment plan. First, complete the IRS Installment Agreement Request Form 9465. This can be done online if you owe $25,000 or less. The IRS can grant you up to 60 months to pay your tax debt. Within 30 days the IRS should let you know if your request has been approved and what you will be required to pay. You must agree to make these monthly payments on time and also commit to withholding enough from your paycheck to meet your tax liabilities for the current year.
Installment agreements aren't cheap. In addition to a setup fee you will also be charged interest (the Federal Short Term Rate plus 3 percent) and penalties of 1/2 percent on the unpaid balance each month or part of a month until it's all paid. The IRS admits that this can be expensive--the General Instructions section of the form recommends that before requesting an installment agreement you should consider "less costly alternatives."
If all else fails, and the IRS decides that you are unable to make any payment at this time, they may delay collection until your situation improves. (Please note that you must always file your tax return even if you are unable immediately to pay.) However, any payment is better than none at all, and the experts found within the DebtHelp network can help you to find the IRS payment plan that is right for you.
Within the DebtHelp network, there are exceptional companies that can help you negotiate IRS payment plans.