You should apply for a payment plan if. The IRS doesn't charge a fee if you pay with a check or direct debit from your bank account. However, if you choose to pay the installment agreement fees with a credit or debit card, the three IRS-approved payment processors do charge a fee, which is generally 1.87% to 1.98%, for processing these types of payments. If you are a low-income taxpayer but are unable to make electronic debit payments when you sign up for a DDIA, your user fee will be refunded once you complete the installment agreement.
A transaction offer is an IRS agreement that is used to resolve your tax liability through an agreed agreement that is less than the amount of tax owed. As part of its Fresh Start program, the IRS recently adopted new rules that make it easier to obtain an installment agreement. The time it takes to get a settlement with the IRS depends on your situation, the type of agreement, and the way you interact with the IRS. Submit your request online through the online payment agreement tool or by phone or by mail by submitting Form 9465, Request for an Installment Agreement.
The interest rate applied to late tax payments differs substantially when you have an installment agreement with the IRS. While interest and penalties continue to accrue for late payment of unpaid taxes, the tax penalty rate for non-payment is halved while an installment agreement is in effect. You must keep up with all filing and payment requirements, including penalties and projected interest on the tax debt, and pay the full amount within six years (72 months) and within collection law, that is, the time the IRS has to collect the amount you owe. Taxpayers generally don't comply with installment agreements if they don't make a monthly payment or if they file another return with a balance due.
For low-income taxpayers who cannot make a direct debit agreement, the IRS will reimburse the installment agreement fees once the installment agreement is completed. If you don't meet the criteria for express installment agreements with guaranteed, simplified, or in-company trust funds, you can still apply for an installment agreement from the IRS. An IRS payment plan is an agreement that you make directly with the agency to pay your federal tax bill for a specified period of time. The initial cost of setting up an installment agreement varies depending on the type of installment agreement, the way the agreement is set up, and the payment options you choose.
Taxpayers who are struggling should contact an IRS representative by calling the number on the notice of their agreement. If a taxpayer is unable to pay the full lump sum payment before the agreed date, they can change their short-term payment plan to a long-term installment agreement by applying for an online payment agreement.
