What should you do if you can’t afford to pay your taxes? Recently I came across a page on the IRS website that answers this question, at least in part. Believe it or not, the IRS offers installment plans that allow taxpayers to pay their taxes over time.
Before we get to the installment plans, however, there’s two words of caution–interest and penalties. Even with the IRS sponsored installment plans, you will owe interest and penalties on the portion of your taxes you pay late. You won’t have to worry about the IRS coming after you, but you will pay more.
And it’s for this reason that the IRS recommends that you look at alternative ways to pay your taxes before signing up for a payment plan. In addition to getting a loan, you can pay your taxes with a credit card or a debit card. You can pay your taxes with plastic by going to www.irs.gov/e-pay. Some things to know–
- If you pay be credit card, the processing company will charge a “convenience fee” based on the amount of the transaction
- If you pay by debit card, you’ll pay a flat fee ranging from $3.89 to $3.95
IRS Payment Plans
If you’ve considered alternative payment options and still want a payment plan, you have two options.
Option #1–Additional Time to Pay: You can request up to 60 to 120 days of additional time to pay your taxes. You will have to pay penalties and interest, but you won’t have to worry about the IRS coming after you. And you’ll generally pay less in penalties and taxes than you would with an installment plan (option #2 below). Also, there are no fees to pay for this option.
You can request additional time to pay through the IRS Online Payment Agreement application or by calling the IRS at 800-829-1040.
Option #2–Installment Agreement: An installment agreement can give you more time to pay your taxes, but there are fees required for this payment option. The fees vary based on how you make your installment payments and your income, but can be as high as $105 just to set up the payment arrangement. You’ll find everything you need to know about this option on the IRS website.
You can begin the process by completing IRS Form 9465 (Installment Agreement Request), by making your request in writing, or by calling 1-800-829-1040. If you owe 25,000 or less in taxes, interest and penalties, you can establish an installment plan online without ever interacting with the IRS. For balances over $25,000, however, it’s a bit more complicated and you’ll need to complete a financial statement to determine the monthly payment amount for an installment plan.
Published or updated April 23, 2012.