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How Do IRS Payment Plans Work? | FAQs

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Learn what you need to know about IRS payment plans so you can wipe out your debt with a system that suits your specific needs.

In this article:

  1. How Do IRS Payment Plans Work?
  2. What Are the IRS Payment Plan Costs and Fees?
  3. Do I Qualify to Apply Online for a Payment Plan?
  4. How Do I Check My IRS Payment Plan Balance?
  5. What Do I Do If I Don’t Qualify for an Online Application?
  6. How Do I Effectively Manage My IRS Payment Plan?
  7. What’s the IRS Payment Plan Login?

Everything Taxpayers Should Know About an IRS Payment Plan

 

Banking Fees Definition: Refers to the amount a bank charges its users for using their system. The charge usually applies to personal and checking accounts.

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How Do IRS Payment Plans Work?

Does the IRS do payment plans? The answer: Yes.

An IRS payment plan allows taxpayers to pay their dues over an extended timeframe using a system that best suits their needs.

Taxpayers still have to pay the penalties and interest rates that come along with late payments. The only difference is that an IRS tax payment plan makes the balance easier to wipe off by breaking it down into several payments.

Plus, it helps you avoid levies and garnishments, among other payment collection actions.

What Are the IRS Payment Plan Costs and Fees?

Before deciding to apply for a payment plan from IRS, you should first understand the fees, costs, and rates that come along with it. The fees taxpayers have to pay depend on what type of IRS payment plan they want to apply and qualify in.

Here are the different payment plans you try to qualify for:

Pay Now Plan

Setup Fee for Online Application: None

Setup Fee for Phone, Mail, or Walk-In Application: None

When you apply for this plan, you agree to pay the full amount you owe on the day the IRS approves your application. You can make the payment through check, money order, automatic payment from checking account, or debit/credit card.

Note: Banking fees will apply when paying by card.

Short-Term Payment Plan

Setup Fee for Online Application: None

Setup Fee for Phone, Mail, or Walk-In Application: None

The taxpayer agrees to pay their outstanding balance within 120 days or less. This payment plan automatically collects dues from your checking account, money order, or debit/credit card.

Note: Banking fees will apply when paying by card.

Long-Term Payment Plan (Automatic Withdrawals)

Setup Fee for Online Application: $31

Low-Income Application: Online Setup Fee Waived

Setup Fee for Phone, Mail, or Walk-In Application: $107

By applying for this plan, the taxpayer agrees to a payment plan that extends for more than 120 days. The IRS automatically collects dues through direct debit.

Note: Banking fees will apply when paying by card.

Long-Term Payment Plan

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Setup Fee for Online Application: $149

Low-Income Application: $43 (IRS may reimburse amount if taxpayers qualify)

Setup Fee for Phone, Mail, or Walk-In Application: $225

Low-Income Application: $43 (IRS may reimburse amount if taxpayers qualify)

By applying for this plan, the taxpayer agrees to a payment plan that extends for more than 120 days. You can pay your dues using non-direct debit electronic modes of payments. Check out their website to view all payment options.

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Note: Banking fees will apply when paying by card.

Changing Existing Payment Plan (Reinstate or Restructure)

Setup Fee for Online Application: $89

Low-Income Application (Automatic Payments From Bank Account): $43

Low-Income Application (Electronic Debit Payments): None

This is for taxpayers who want to reinstate their previous plan or restructure their current one.

Note: Banking fees will apply when paying by card.

Tip: Taxpayers pay for less if they apply for the IRS payment plan online. Plus, it also saves you a lot of time and effort if you submit your IRS payment plan form through their website.

Try and see if you qualify for an online application.

RELATED: What Are The IRS Payment Plan Options?

Do I Qualify to Apply Online for a Payment Plan?

After checking which payment plans you qualify for, the next thing to consider is your qualification as a taxpayer to apply online. Not only does it save you the hassle of going to the IRS office, but you can also get lower setup fees.

Individuals can qualify to apply online if:

  • Long-Term Payment Plan: The taxpayer owes $50,000 or less in combined tax, interest, and penalties, and has submitted all the necessary tax returns.
  • Short-Term Payment Plan: The taxpayer owes $100,000 or less in combined tax, interest, and penalties.

Businesses can qualify to apply online if:

  • Long-Term Payment Plan: The tax-paying business owes $25,000 or less in combined tax, interest, and penalties, and has submitted all the necessary tax returns.

Note: Sole proprietors and independent contractors should apply as an individual taxpayer.

How Do I Check My IRS Payment Plan Balance?

Taxpayers can check their outstanding balance and payment history by logging in their tax account. Keep in mind that you have to undergo identity authorization which may take one to three weeks to access your tax account.

It might seem like a tedious process, but it only exists to protect you and your money from hackers.

What Do I Do If I Don’t Qualify for an Online Application?

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You can still qualify for an IRS payment plan even if you can’t submit the form online. Taxpayers can opt to call the IRS payment plan phone number 800-829-1040 for more information.

How Do I Effectively Manage My IRS Payment Plan?

The IRS payment plan is a taxpayer’s last shot at wiping out their debt. If you apply for one, you should do your best to maintain it and avoid default at all costs.

Here are some tips on how you should manage your plan:

  • Always make the minimum monthly payments on time.
  • Set aside extra money for tax payments, even if you have already made the minimum contribution.
  • Direct your future tax refunds to minimize the amount on your payment plan.
  • Review recent statements to ensure there are no discrepancies.
  • Use an IRS payment plan calculator to manage your dues.

What’s the IRS Payment Plan Login?

Taxpayers can revise their payment plan by using the Online Payment Agreement Tool. You’ll immediately see the option to review and revise your current IRS payment plan, payment amount, and due date on the first page.

If you acquire a larger source of steady cash flow after a few months, you might want to consider shortening the payment plan period. This’ll help you save up on interest rates by directing a larger amount of your payments to your outstanding balance.

For more IRS payment plan options when you can’t afford your tax bill, watch this video from GBR:

The pressure of accumulating unpaid taxes can be quite heavy; which is exactly why the IRS created customizable payment plans for taxpayers.

By using the IRS payment plan, you can create a system which may allow you to live a debt-free life in just a few months. Combined with an effective budgeting system, this may be your one-way ticket to financial freedom.

Do you have any unanswered questions about applying for an IRS payment plan? Post them in the comments section below!

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