From The Desk of Keith L. Jones, CPA
Types of IRS Tax Payment Plans
The IRS offers several types of payment plans for taxpayers who cannot pay their tax liability in full. These plans allow individuals and businesses to pay back their owed taxes over an extended period. Here are some common IRS payment plans:
Short-Term Payment Plan : This is available for individuals who can pay their total tax debt within 120 days or less. No setup fee is required for this plan.
Long-Term Payment Plan (Installment Agreement) : This option is for taxpayers who need more than 120 days to pay off their tax debt. There are different types of installment agreements:
Guaranteed Installment Agreement : For individuals who owe less than $10,000, excluding penalties and interest, and can pay the entire amount within three years.
Streamlined Installment Agreement : For individuals who owe $50,000 or less and businesses that owe $25,000 or less, and can pay the entire amount within 72 months.
Partial Payment Installment Agreement : This allows for smaller, more manageable payments but typically requires a financial statement to determine the monthly payment amount.
Non-Streamlined Installment Agreement : For individuals or businesses who owe more than the Streamlined limits and require a financial statement to determine the payment amount.
Offer in Compromise (OIC) : This is an agreement between the taxpayer and the IRS that allows the taxpayer to pay less than the full amount owed. An OIC is generally only approved when the IRS determines that the taxpayer cannot pay the full amount or doing so would cause financial hardship. Taxpayers must meet strict criteria to qualify for this option.
Temporary Delay : If you're facing financial hardship, the IRS might temporarily delay collection until your financial situation improves.
Pay by Credit or Debit : This is not a formal plan, but the IRS does allow taxpayers to pay their tax debt using a credit or debit card, although fees may apply.
Note that fees, interest, and penalties may continue to accrue until the total tax liability is paid off. Taxpayers must also be up-to-date with filing all required tax returns to qualify for most payment plans. Furthermore, not all taxpayers qualify for each plan; eligibility criteria differ.
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