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When you file your taxes, you may discover that you owe money to the government. If it’s a large sum of money, you might find you are unable to pay it right away. If you find yourself in this situation, it is strongly advised that you sign up for an IRS payment plan to avoid getting hit with an IRS levy action and/or a Notice of Federal Tax Lien.
We’ve broken down everything you need to know about IRS payment plans so you can decide if it’s the best option for you.
What Are IRS Payment Plans?
IRS payment plans are plans that the IRS offers so that you can pay your tax bill in installments. You can do a short-term or a long-term payment plan and pay using various methods. Keep in mind that the IRS will charge you penalties and interest as well as fees for setting up your plan.
What Do You Need to Apply for a Payment Plan?
You can apply for a payment plan on the IRS’ website. When applying, you will need to provide certain information including your name as it appears on your return, your email address, address on your return, birthdate, filing status, and Social Security number or ITIN. You may also need to provide the balance due based on the agreement you request.
How Do You Make Payments?
If you’re an individual with a balance over $25,000 or if you own a business and owe over $10,000, you will pay through Direct Debit. Otherwise, if your balance does not reach these amounts, and you’re an individual filer, you can pay directly from a checking or savings account through Direct Pay. You can also pay electronically online or by phone using the Electronic Federal Tax Payment System (EFTPS), which requires enrollment. Your other options include paying by check, money order, or debit/credit card. Fees will apply when paying by card.
With a long-term payment plan, called an installment agreement, you can pay through Direct Debit, where the IRS takes automatic monthly payments from your checking account. There is also an option to make monthly payments online, by phone, by check, money order, or a debit/credit card. Again, you will be charged fees when you use a card.
What Are the Payment Plan Fees?
For short-term payment plans of 180 days or less have a $0 set up fee but penalties and interest will continue to accrue until the balance is paid in full.
For long-term payment plans, online application fees range from $31 – $107 and applications taken over the phone, by mail or in-person range from $149 – $225 If you qualify for low-income status,, the setup fee can be waived. You will need to pay accrued penalties and interest until the balance is paid in full.
Whenever you want to change an existing payment plan, you will pay a $10 fee online or an $89 fee if you revise it on the phone, through the mail, or in-person. If you qualify for low-income status, the fees are $10 and $43, respectively, but these could be reimbursed as long as you qualify.
How Do You Check Your Balance?
When you set up your payment plan, you’ll create an account with IRS.gov. From there, you can login to the View Your Account Information page to see your balance. It may take one to three weeks to see a recent payment made to your account. If you owe taxes for more than one year, you will see your balances broken down by year.
Paying Your Taxes with TaxAct
If you’re ready to file your taxes, then TaxAct is here for you. You can either file on your own or with the help of an Xpert. Get the maximum refund with TaxAct if you’re eligible for one. By using TaxAct, you can easily file on time and stay on track when it comes to your taxes.
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TaxAct Xpert Assist™ is available to certain users of the online TaxAct consumer 1040 product. Service hours limited to designated scheduling times and by expert availability. Some tax topics or situations may not be included as part of this service. View full TaxAct Xpert Assist Terms and Conditions here