"Did You Know?" #2
DID YOU KNOW the IRS offers installment agreements if you can’t pay your taxes due in full?
April 18th marked the end of the 2022 tax filing season. Some taxpayers now owe money that they can’t afford to pay. Even if you requested an automatic extension of time for FILING your taxes, the amount you expect to owe was still due by April 18th.
Can’t pay the full balance right now? Never fear. The IRS has a couple of payment plan options available.
Short-term payment plan: You agree to pay the full amount owed in 180 days or less. There is no set-up fee.
Long-term payment plan or “Installment Agreement”: You agree to pay monthly payments over a longer period, up to 72 months.
Direct Debit Installment Agreement: You authorize the IRS to automatically deduct an agreed amount each month from your bank account. There is a setup fee: $31 if set up online or $107 if set up in person, by phone, or by mail. It’s possible this fee can be waived for low-income individuals.
Paying monthly by Direct Pay, mail, or EFTPS: You make the payments each month. There is a setup fee: $130 if set up online, and $225 if set up by phone, mail, or in person. It’s possible this fee can be waived for low-income individuals.
For these payment plans, as long as you continue to make the agreed monthly payments on time, the IRS will not pursue collection activity against you. Please note that any of the options listed below will still accrue interest and penalties until the balance is paid in full.
*Under some circumstances it’s possible to apply for penalty abatement, but the IRS is required by law to charge interest. The current rate is 7%. The sooner you pay the balance, the less interest you will pay.