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. Your specific tax situation will determine what payment options are available to you. Payment options include a full payment, a short-term payment plan (paid in 180 days or less), or a long-term payment plan (installment agreement) (monthly payment). But don't assume that a payment plan is your best option, as there are obvious drawbacks.
Most importantly, interest and penalties continue to accrue while you still owe. In combination with penalties, the interest rate usually ranges from 8 to 10% per year. It's possible to pay for years and owe more than when you started. 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. 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. Read H&R Block's guide to the types of IRS installment agreements and how to determine which one is right for you. If you're not eligible for a payment plan through the online payment agreement tool, you may still be able to pay in installments.
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. 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. The payments accepted with this plan are more limited, with a single option called Direct Debit Payment Agreement (DDIA). The user fees that taxpayers must pay to enter into an installment agreement with the IRS will change after January.
Many installment agreements with the IRS require the payment of additional fees to establish plans and organize payment methods. Unless IRS rules consider you to be a low-income taxpayer, most payment agreements require a down payment with the IRS. Pay by Direct Debit (automatic monthly payments from your checking account), also known as an installment direct debit agreement (DDIA). The interest rate on unpaid taxes varies depending on whether or not you have an installment agreement and whether or not you file it on time.
If you are a low-income taxpayer, you will not be charged the user fee if you agree to make direct debit payments through an installment direct debit agreement (DDIA). The Office of Management and Budget has directed federal agencies to charge users fees for services such as the installment agreement program. Many people who can't pay the balance in full right away will sign an installment agreement with the IRS. You should never pay the IRS with a check or directly from your bank account (see the IRS direct payment option).
