It’s very easy to set up a monthly plan with IRS. You may opt for installment agreement when you don’t have resources to pay your tax debt immediately. Setting up a installment plan is fairly easy. Either you or your lawyer can set an installment agreement by filling up some paperwork, over the phone, or by using OPA (online payment agreement) web app.
It’s very important to know that there are four types of installment agreements. Therefore, you need to review which of these will be approved by IRS for your situation, and choose the best one as per your budget and financial constraints.
You first need to find out the amount of unpaid taxes that you have. At this stage, call IRS to get copies of tax returns to verify the exact amount you own. This amount will include your original tax, penalties and interest.
IRS may charge you a user fee to set up an agreement. $120 for a new installment agreement, $52 for a direct debit installment agreement, or $20 for reinstating or restructuring a defaulted installment agreement. If you’re a low income taxpayer, you can request a lower fee.
Fill out Installment Agreement Request, Form 9465. You can also use OPA on the IRS website to set up your payment plan. Now choose any day (between 1’st and 28’th) of the month when you want to make payment. Keep in mind that you will have to make payment exactly on the same day of every month in future.
Now, choose your desired monthly payment amount. This amount will have to be paid each and every month, and you can always pay more if you want. You will get a reply from IRS within 30 days.
Once you’re approved, you can make payment every month. You can pay via money order, check, EFTPS, credit card, or even automatic withdrawals from your saving account.
You can also request your installment agreement over phone 1-800-829-1040. IRS will set up your payment plan over phone and will send you the paperwork at your physical address.
Gregory Lane of Hillhurst Tax Group shares a tip, “The IRS is bound to accept your payment plan if your total tax dues are below $10,000 and monthly payments will clear the debt within 3 years. You can ask your lawyer to set up your payment plan. This approach is helpful if you want to negotiate for a lower monthly payment that suits your budget.”
Your plan will not be approved if you’ve not filed all your tax returns. So you will have to clear your back taxes before requesting a payment plan.
If you plan to pay via check or money order, make sure you mail them to IRS at least 8-12 days before the due date.