You may be able to avoid the added expense of a tax debt lawyer if you set up a payment plan with the government. You can set up an IRS payment plan for your back tax online, in person, by phone, or by mail.
If you owe the IRS gov taxes, 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 will not reduce or eliminate the interest. Payment plans also do not protect you from late-payment penalties.
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) – Cannot owe more than $100,000 in unpaid taxes, interest and penalties
- Extended short-term (180 days) – Cannot owe more than $100,000 in unpaid taxes, interest and penalties
- Long-term (More than 120 days, usually 72 months) – 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
- $149 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 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.