You Can Pay Off Your Taxes with an Installment Plan
When paying off IRS debts, Uncle Sam has a system in place allowing taxpayers to pay off tax debts in installments. Over time, the IRS modified its installment plans. Some bode well for you, while others not so well.
A good improvement for you is the introduction of electronic online application for an IRS installment plan. More than 75 percent of filers are entitled. Since the October launch, approximately 3,000 applied. You may apply online if you owe $25,000 or less. If you owe less and can’t pay in full by the April cut-off date, consider an installment plan.
A 120 days extension is regarded as a short-term option and is most worthwhile. You will get extra penalties and interest will accumulate but you won’t pay a fee.
The other option is monthly payments with a user fee that could rise to $105 if not paid by direct debit from a bank account. This fee lowers to $52 if paid by direct debit. Lower income taxpayers may qualify for $43. Previously, all installment plan taxpayers across-the-board paid $43. This fee rose from 2007. It seems, credit card companies showed the IRS there’s profit from increasing service fees.
Your outstanding tax bill keeps incurring penalties and interest. IRS interest is less than credit card interest. It’s the federal short-term tariff plus 3 percentage points. It results in 8 percent for tax shortfalls for the quarter starting 1 April.
For those owing more than $25,000, a payment plan is possible. Complete a paper form 9465. You may be asked to also complete a form 433F to disclose your assets.
An IRS installment plan is an agreement. Be sure you understand what you sign. You will be in default if you don’t pay or don’t pay on time. This also applies if you get a past-due tax bill in the future. It gives the IRS the right to begin levy or tax lien procedures against you.
