You may be able to avoid the added expense of a tax debt lawyer if you set up a payment plan with the government. Instead of paying your entire tax bill all at once, a payment plan breaks the sum into smaller payments you make over time.
If you owe the IRS gov taxes, it’s important to note that the amount continues to accumulate interest until you pay off the full balance. Setting up a payment plan can help you pay the IRS slowly, but does not reduce or eliminate the interest. Payment plans also do not protect you from late-payment penalties.
Worried about paying your tax debt all at once? Consider setting up one of several types of IRS payment plans.
The IRS offers short-term, extended short-term, and long-term payment plan options. The total amount of money you owe may determine which repayment plan you can follow.
- Short-term (120 days) – To set up a short-term plan, you cannot owe more than $100,000 in unpaid taxes, interest and penalties
- Extended short-term (180 days) – For an extended short-term plan, you cannot owe more than $100,000 in unpaid taxes, interest and penalties
- Long-term (More than 120 days, usually 72 months) – For a long-term plan, you cannot owe more than $50,000 in unpaid taxes, interest and penalties
The short- and extended short-term plans do not have a setup fee. You can make payments by check, money order, debit/credit card, or bank account withdrawals (Direct Pay).
The long-term repayment plan, however, has a more complex setup fee structure based on how you apply and make payments:
- $31 to apply online and pay with automatic withdrawals
- $130 to apply online and pay by another method (check, money order, etc.)
- $107 to apply in person, by phone, or by mail and pay with automatic withdrawals
- $225 to apply in person, by phone, or by mail and pay by another method
If you owe more than $25,000, your payments must be automatic bank account withdrawals. And, if you’re paying by debit card, you’ll likely pay a processing fee between $2 and $4. If you’re paying by credit card, the processing fee is 2% of the payment.
If you meet the qualifications for a low-income taxpayer – typically with an income at or less than 250% of the Federal Poverty Level – you may be able to waive the setup fees for automatic withdrawals. Also, you may not have to pay the full fees; the IRS sometimes allows low-income taxpayers to pay just $43, no matter which application method they use.
You can apply for an installment plan for taxes online, by mail, or by phone. To confirm your identity, you generally need to provide the following:
- Name and address as they appear on your most recent tax return
- Filing status
- Date of birth
- Social Security number
- Email address
- Amount of money you owe
- Financial account numbers
Payment plans are not permanent; you can typically request changes to your monthly payment amount, due date, and payment method if necessary.
If you are unable to repay your high tax debt without significant financial struggles, the government may erase a portion of your debt if you qualify for the next tax program.
By Admin –
