IRS Income Tax Payment Plans
Paying IRS taxes can be a challenge, especially if you're facing financial difficulties and don’t have the funds readily available. However, there are several options to help manage this situation effectively. From setting up a payment plan to exploring potential relief programs, it’s crucial to address your tax obligations proactively. The IRS offers various solutions, such as installment agreements and temporary payment postponements, to assist taxpayers in managing their debt without undue strain.
Important: IRS tax penalties for not filing a tax return are higher than the penalties for not paying taxes: estimate your potential tax penalties.
Have you already filed your taxes and need to set up a payment plan? Apply here:
Set Up a Payment Plan
How to Pay IRS Taxes If I Don't Have the Money?
Start and e-file your taxes first. Once your return is accepted by the IRS and you don't have the funds to pay your taxes immediately, you should look at the tax payment plans listed below. These plans enable you to work with the IRS to pay your tax debt over time rather than all at once. If you owe taxes for a previous year, see back taxes or previous tax year return forms.
When it comes to paying IRS taxes and/or state taxes, there are essentially three scenarios:
1. Ready to pay now: A taxpayer has the funds required or is okay with paying taxes by direct payment or debit/credit card now.
2. Not ready to pay now, but will pay over time: A taxpayer does not have the funds to pay taxes on time, but does want to pay over time. On this page, you will find payment plan options for this scenario.
3. Not paying now or over time; does not want to pay taxes for any reason: A taxpayer who does or does not have the funds now, but does not want to pay taxes now nor over time via a payment plan. In this case, the IRS will likely issue a tax levy or wage garnishment against tax debt.
How to Enroll in an IRS Payment Plan?
Your individual IRS income tax situation and future income prospects will determine which of the below tax payment plans are available to you.
Important: If you have not filed your current year tax return or back taxes, do this as soon as possible, as the late filing penalties and interest fees are generally higher than the late payment penalties and interest fees. Use the eFile.com PENALTYucator for more tax penalty details.
See how to sign into your existing IRS Account, which may require an IP-PIN.
In the table below, find the different payment plants accompanied by a description of each, as well as brief instructions and recommendations.
What IRS Payment Methods Are Available?
Full Payment Agreements
If you cannot pay all your taxes on time, you may apply for a long or short-term payment extension with the IRS via an Online Payment Agreement or OPA. The short-term plan allows you to repay your taxes within 120 days. You may qualify online for a short-term payment plan if you are an individual taxpayer who owes $100,000 or less in combined taxes, penalties, and interest. If you require more time, you can apply for a long-term plan or installment agreement, which you can be granted if you owe $50,000 or less and want to repay in more than 120 days—see below. Keep in mind that setup fees for a plan might be higher if you apply for a tax payment plan by phone at 1-800-829-1040, via mail, or in-person.
We recommend you apply online because you will receive immediate notification of whether your payment plan has been approved or not by the IRS. If the IRS approves your payment plan, you may be subject to the fees listed on the IRS page for repayment plans. For just applying, these fees are as little as $0 for short-term and $31 or more for long-term, plus applicable fees if paying by card. If approved, you can use the Online Payment Agreement tool on your IRS account to make the following changes: adjust monthly payment amount, change monthly payment due date, convert existing agreement to a Direct Debit agreement, and reinstate after default.
Installment Agreements
Should you not be able to pay your income taxes in full immediately or within 120 days, you may qualify for a monthly plan, including the long-term installment plan. You would pay taxes owed in more than 120 days with monthly payments. Use the Online Payment Agreement site to apply online if you have filed your return already for an installment plan. Otherwise, apply by phone at 1-800-829-1040 or mail Form 9465 if you have not filed a return yet—FileIT. For a long-term payment plan, the online setup fee is $149. The phone, mail, or in-person setup fee is $225. Low income taxpayers pay less in setup fees. See if you qualify for a fee reduction by applying for the low-income certificate via the Form 13844. Accrued penalties and interest payments apply until the tax balance is paid in full.
Once you start the application process, you will see more detailed information about both plans: Full Payment and Installment Agreements. Your personal tax and future income situation will play an important role in deciding which plan to select. Each of these payment plans will offer these options: direct debit or Electronic Federal Tax Payment System® (EFTPS) from your bank account, or payroll deduction from your employer—submit Form 2159, Payroll Deduction Agreement. You should be current on all filing requirements before you select a payment plan.
Partial Payment Installment Agreement
If you can't pay your taxes via the two plans mentioned above, you may propose a partial payment installment agreement or PPIA. The PPIA is between you as the taxpayer and the IRS, providing for less than the full payment of the tax liability by the expiration of the collection period. Read your rights as a taxpayer before you call 1-800-829-1040.
This is recommended if you are struggling to find a plan that allows you to pay in full. This agreement will allow you to pay for a smaller amount over time. See Offer in Compromise below for a similar option and decide which is best for you.
Offer in Compromise Agreement
The Offer in Compromise Agreement (OIC) is a settlement between you as the taxpayer and the IRS that resolves your tax liability by payment of an agreed upon reduced amount. You have these options with an OIC:
Lump Sum Payment: The full debt must be paid in 5 or fewer installments,
Short-Term Periodic Payment: The debt must be paid within 24 months, or
Deferred Periodic Payment: The debt may be paid in more than 24 months, but must be paid within the 10-year statutory period which the IRS has to collect the debt.
The only pre-requisite is that you have to have filed all tax returns. Taxpayers in an open bankruptcy proceeding aren't eligible to enter into an OIC. Use this Pre-Qualifier online OIC tool to verify if you might be eligible for the Offer in Compromise Agreement. Use Form 656 Booklet and Form 433-A: Form 656 for a step-by-step guide to apply for the OIC agreement; Form 433-A and all required documentation as specified on the forms and Form 656(s)—FileIT these forms. The initial non-refundable application fee for Form 656 is $205, unless you qualify for the low-income via the Form form-13844—FileIT—or submit a Doubt as to Liability offer.
Open up the Form 656-L Booklet and then use the OIC online Pre-Qualifier guide. Then, call the IRS and discuss your current tax situation and future income prospects regarding these PPIA or OIC options. If your OIC gets rejected, you can request for an appeal for the offer in compromise with Form 13711 within 30 days of the rejection—FileIT. Mail the form to the office that originally sent the rejection letter.
Currently Not Collectible Status
A Currently Not Collectible (CNC) status is an IRS determination to stop the collection of taxes for a taxpayer who cannot pay due to financial hardship. There’s a procedure for requesting CNC status, which involves providing the IRS with current financial information so they can determine your eligibility for CNC status. This status is temporary and does not remove the tax liability. The IRS may place the taxpayer's account in CNC if their financial situation improves.
Taxpayers who are in CNC status should pay what they can until the IRS accepts a formal offer to pay the tax liability, if that’s an option. Apply for CNC status through the Form 433-F. Or call 1-800-829-1040 or submit your request in writing. The IRS typically reviews these requests periodically. Note that the IRS may still pursue collection through other means or other types of repayment plans.
Bankruptcy
Bankruptcy may offer relief for unpaid taxes in some cases, but this depends on the type of bankruptcy and specific tax situations. In general, taxes that are more than 3 years old, which were filed more than 2 years ago, and are not assessed within 240 days are eligible for discharge under Chapter 7 bankruptcy. Chapter 13 bankruptcy can provide a repayment plan to manage and settle taxes over time, potentially reducing the amount owed depending on the financial circumstances.
Consult with a bankruptcy attorney or advisor to determine if bankruptcy is a viable option for your tax situation. Review the Bankruptcy and Taxes publication for more detailed information about how different types of bankruptcy may affect your tax liability.
When you prepare and e-file with eFile.com, you gain access to different ways to pay onsite. Learn how to balance your tax withholding via Form W-4 and keep more of your hard-earned money each tax year. This will help if you are concerned you may owe money on your next tax return.
How to Not Owe Taxes When You File?
Avoiding owing taxes when you file can be achieved through careful planning and proactive management of your finances. Here are some strategies you can use to minimize or eliminate the risk of owing taxes:
1. Adjust Your Withholding: ensure your W-4 form accurately reflects your current tax situation. You can adjust the number of allowances or specify an additional amount to be withheld from each paycheck.
2. Make Estimated Payments: If you are self-employed or have other sources of income not subject to withholding, make estimated tax payments quarterly. Use IRS Form 1040-ES (pay online) to calculate and pay these amounts.
- Avoid Penalties: Ensure you pay enough throughout the year to avoid underpayment penalties. Generally, you need to pay at least 90% of your current year’s tax liability or 100% of your previous year’s liability (110% if your adjusted gross income is more than $150,000).
3. Maximize Deductions and Credits: Determine whether taking the standard deduction or itemizing is more beneficial. Itemize deductions like mortgage interest, property taxes, and charitable contributions if they exceed the standard deduction.
- Tax Credits: Claim all eligible tax credits, such as the Child Tax Credit, education credits, and energy efficient home improvement credits. Credits directly reduce your tax liability.
4. Contribute to Retirement Accounts: Contribute to a traditional IRA or 401(k) to reduce your taxable income. Contributions to these accounts are often tax-deductible.
- Roth Accounts: Although Roth IRA contributions are made with after-tax dollars, qualified withdrawals are tax-free, which can be beneficial for long-term tax planning.
5. Consider Health Savings Accounts (HSAs): Contribute to an HSA if you have a high-deductible health plan. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
6. Keep Accurate Records: Maintain detailed records of your income and expenses throughout the year to ensure you don’t miss out on deductions and credits.
- Receipts and Documentation: Keep receipts and documentation for deductible expenses and contributions to retirement and HSA accounts.
7. Plan for Life Changes: Update your withholding or estimated payments based on significant life events such as marriage, divorce, or the birth of a child, which can affect your tax liability.
8. Work With Us: If your financial situation is complex or you have significant changes, consider contacting us to help with tax planning and ensure you’re taking advantage of all available tax benefits.
Begin preparing your taxes now; gather all your forms and statements, locate your previous tax forms and last year's adjusted gross income, learn ways to save on taxes during the year, and find different money-saving methods on everyday expenses.
Take control of your personal life relationships, finances, and taxes: follow the tips on this page and keep up with tax planning for next year. You can use this free tax refund calculator to get a high-level understanding of your taxes.
Additional questions on paying your payment plans? Contact one of our Taxperts®.
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